Marilyn Tavenner Memo to Senate Finance Committee

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UNITED STATES SENATE

COMMITTEE ON FINANCE

NOMINATION HEARING FOR MARILYN B. TAVENNER TO BE ADMINISTRATOR

OF THE CENTERS FOR MEDICARE AND MEDICAID SERVICES

APRIL 9, 2013

QUESTIONS FOR MARILYN TAVENNER

Questions from Senator Baucus

Question 1

Arguably, the single most important provision of the ACA was the creation of health

insurance Marketplaces (also known as Exchanges). These marketplaces, where

individuals can compare and shop for health insurance, need to work seamlessly come 2014

if the law is to be considered a success. Consumer outreach and branding are essential to

ensuring people are aware of their options and able to enroll in these new Marketplaces.

How will CMS help businesses work in the Marketplaces? Can you describe the different

types of outreach activities are CMS conducting to ensure consumers know about the

Marketplaces?

Answer: CMS has been busy implementing a 4 step plan for outreach. The Preparation phase

began last year and continues until Open Enrollment begins. This includes conducting consumer

research and building infrastructure for our customer service channels like the call center and

website. The Education phase began in January 2013 and goes through June. It includes building

awareness of the new Health Insurance Marketplace, by creating content for consumers, and

training personnel and partners.

The Anticipation - or "Get Ready" - phase of work begins this summer. It includes additional

details about program operations (like web and call center) as they come online, as well as

training for navigators and other certified assisters who will help consumers through the

enrollment process. The Enrollment phase will run from October 2013 to March 2014. It

includes a major launch effort that will engage all media channels, as well as provide new

customer service channels and in-person assistance.

An additional component of our efforts to enroll Americans in the Marketplace is the Navigator

program. Through this program, CMS will ensure that consumers who need customer service can

receive it from trained professionals. Navigators provide unbiased and impartial information to

consumers about health insurance, the new Health Insurance Marketplace, qualified health plans,

and public programs including Medicaid and the Children’s Health Insurance Program.

Navigators will serve an important role of ensuring that people understand the health coverage

options available to them. The Navigators will also provide fair and impartial assistance to

consumers to help them review their health coverage options as they learn about the new

Marketplace.

In addition to Navigators, consumers will also have access to assistance through services such as

a call center, where customer service representatives can provide referrals to the appropriate state

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or federal agencies, or other assistance programs such as in-person assistors and certified

application counselors. To help educate small businesses, we plan to work with regions to

provide updates on recent rollouts and to conduct business outreach. We held meetings in March

– in Dallas, TX and Atlanta, GA – and look forward to working with other regional offices to

provide more specific information on the impact of the Affordable Care Act on businesses.

Question 2

The Office of the Inspector General recently released a report describing problems with

CMS’s use of surety bond requirements. CMS currently requires durable medical

equipment (DME) suppliers to have a $50,000 surety bond for each location. CMS can then

use these bonds to collect payment from overpaid or fraudulent providers. However, as

noted by the OIG, CMS has not effectively utilized surety bonds to collect overpayments.

For example, CMS has not used authority granted to it under the Affordable Care Act to

increase the size of the surety bond for providers with a high billing volume. What are you

doing to make sure CMS is using all available tools to fight and prevent health care fraud?

Answer: I challenge my management team each and every day to improve the way we do

business and I have made it clear that combatting fraud, waste and abuse in all of our programs is

a top priority. We are continually looking at ways our Center for Program Integrity can leverage

the expertise of other CMS components, our contractors and law enforcement partners.

CMS understands the importance of surety bonds as a program integrity tool and is exploring

multiple avenues to strengthen this important tool. Since January 2012, CMS has been working

to recover overpayment debts from Durable Medical Equipment (DME) suppliers by asserting

claims against the surety companies. As of July 2012, CMS has collected $263,000 from surety

companies for DME supplier debts. In addition, there have been cases where DME suppliers

have repaid overpayments voluntarily once they become aware CMS referred their debt to the

surety company for collection. CMS believes its efforts to collect outstanding obligations from

surety companies will continue to spur DME suppliers to satisfy their Medicare debts.

In addition to the surety bond requirement, CMS has implemented enhanced screening

requirements for DME suppliers. All newly enrolling DME suppliers are in the highest risk

category for screening and are subject to unannounced site visits and criminal background

checks. These efforts will ensure that only qualified and legitimate providers and suppliers can

provide health care items and services to Medicare beneficiaries. We are also leveraging other

tools to more effectively combat DME fraud, waste and abuse through the use of the Fraud

Prevention System and DME competitive bidding.

Question 3

The Affordable Care Act originally envisioned every state expanding Medicaid to cover all

non-elderly individuals with incomes up to 133 percent of poverty. But following the

Supreme Court’s ruling in July, states may choose whether to expand Medicaid. Creating

this choice for states gave CMS considerable power, because CMS must approve or deny

every Medicaid state plan. For example, in the past few months, CMS has decided that

states must expand all the way to 133 percent of poverty to qualify for the increased

FMAP, rather than allowing states to stop at some lower coverage level, like 100 percent of

poverty. Currently, CMS is deciding whether states can buy into the Exchange through

Medicaid premium assistance, as contemplated by Arkansas and Montana. All of the

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decisions significantly impact the shape of Medicaid today and in the future, so they must

be made carefully and transparently. How is CMS approaching some of these tough

decisions? How is CMS engaging the public in the process?

Answer: As with all regulations and guidance developed by CMS, our first obligation is to

ensure we faithfully implement Medicaid’s statutory requirements. Our guidance to states on the

Medicaid expansion has been rooted in the statute and Congressional intent. Additionally,

implementation of the Affordable Care Act has required CMS to issue new regulations and

Medicaid demonstration waiver transparency and public input process. Through these processes,

we have meaningfully engaged the public and have drawn from their comments to shape final

regulations and demonstrations. CMS is also in close contact with states and has used their

experiences, questions and suggestions to develop and inform our policy guidance. As

implementation continues, CMS will continue to engage our stakeholders to inform future

decisions and the need for additional guidance.

Question 4

The Affordable Care Act (ACA) created a number of delivery system reform

demonstrations and established the Center for Medicare and Medicaid Innovation (CMMI)

within CMS. These demonstrations are intended to test and evaluate new models to reduce

Medicare and Medicaid spending while preserving or enhancing the quality of care. CMS

is running a number of demonstrations, but has performed few in rural areas. What more

can be done at CMS to lower the cost and improve the quality of care in rural areas?

Answer: CMS has worked very hard to ensure that its models have geographic distribution so

that each model is tested in variety of communities nationwide.

The Advance Payment Accountable Care Organization (ACO) model was designed for

physician-based and rural providers with less access to capital to help increase the participation

in the Shared Savings Program by these groups. Currently, there are 35 ACOs participating

under this demonstration. The application for the Advance Payment ACO was designed with

ACO’s that serve rural populations in mind.

Additionally, there are a number of rural participants in the Federally Qualified Health Center

(FQHC) Advanced Primary Care Practice Demonstration. This demonstration is testing

enhanced support to FQHCs to help them become medical homes. Finally, we are also testing

models in rural areas through the Health Care Innovation Awards: 49 of our awards (nearly half)

serve both urban and rural areas, with 16 serving exclusively rural areas. The Health Care

Innovation Awards are funding grants to applicants who will implement compelling new ideas to

deliver better health, improved care and lower costs to people enrolled in Medicare, Medicaid

and Children's Health Insurance Program (CHIP), particularly those with the highest health care

needs.

We are aware that some rural stakeholders have had difficulty meeting some of the requirements

of the existing programs and models. To address these concerns, we are working with them to

find new models that might be appropriate for rural communities. For example, CMS is

currently developing the Frontier Community Health Integration Demonstration Program for

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very small critical access hospitals with an inpatient census of less than five in sparsely

populated states.

Question 5

Unlike Medicare, most delivery system decisions in Medicaid are made at the state level.

Within broad federal parameters, states decide which services to cover and how much to

pay. This makes it much harder to promote delivery system reforms in Medicaid than in

Medicare, because the federal government cannot simply change payment policies to

incentivize certain care delivery models. However, states have made a lot of progress in

changing how care is delivered – to promote prevention and higher quality, lower cost care

– and CMS has been helpful in the process. Unfortunately, these efforts have not gotten a

lot of attention and Medicaid continues to be criticized as an old, broken program. Please

highlight some of these innovations, especially as they relate to individuals with disabilities

and kids. Please also tell us how you plan to do more to improve Medicaid.

Answer: We believe there are a number of important opportunities to test reform models in the

Medicaid program and we are actively working with states to undertake these initiatives. The

Innovation Center is currently carrying out three initiatives that include State Innovation Models

initiative, the Strong Start initiative and the Comprehensive Primary Care initiative, all of which

allow the participation of state Medicaid programs. In addition, the Innovation Center is

overseeing the Medicaid Emergency Psychiatric Demonstration and the Medicaid Incentives for

the Prevention of Chronic Diseases Model.

We have a number of initiatives and programs that focus on improving the health and healthcare

outcomes for pediatric populations, including the Strong Start for Mothers and Newborns

initiative. The Strong Start initiative is an Innovation Center project focusing on reducing early

elective deliveries and reducing the rate of preterm births among high-risk women in Medicaid

and CHIP. Additionally, we have released the Initial Core Set of Child Health Care Quality

Indicators for Medicaid and CHIP, established for voluntary use by state Medicaid and CHIP

programs, which includes a range of children’s quality measures encompassing both physical

and mental health, including chronic conditions such as asthma and diabetes. CMS is pursuing

several other initiatives to improve the health care that children enrolled in our programs receive,

including the Pediatric Quality Measures Program and the Pediatric Electronic Health Record

Format to help improve the health care that children enrolled in our programs receive.

Additionally, the Innovation Center is testing medical homes for individuals with disabilities and

complex health conditions, high-risk chronically ill children, and individuals with breast, lung, or

colorectal cancer.

As we do in all areas, we continue to look for opportunities to test promising models in the

Medicaid program and understand the importance of delivering better, more efficient care to

Medicaid beneficiaries.

Question 6

Medicare currently pays physicians on a fee-for-service (FFS) basis, which encourages

doctors to maximize the amount of services they provide. As part of efforts to reform

physician payment and replace the Sustainable Growth Rate (SGR), some have considered

moving physician payment away from FFS and to alternative delivery system models,

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including accountable care organizations (ACOs), bundled payments, and medical homes.

These models should improve physicians’ incentives to provide high quality, low cost care.

However, CMS is still testing many of these models and it may be too early to determine

their effectiveness. What role are physicians playing in the delivery system models the

Innovation Center is testing? How can these new models play in providing an alternative

to physician fee-for-service payment?

Answer: One of the goals of the Innovation Center is to create a solid business case for

physicians to engage in quality improvement. Therefore, during the development of models, the

Innovation Center actively involves and receives ideas from stakeholders, such as physicians,

clinicians, and analytical experts. Since its formation, the Innovation Center has held numerous

regional meetings, listening sessions, and open-door forums to engage thousands of stakeholders

from around the country. In addition, stakeholders have shared more than 500 ideas for

improving health care through the Share Your Ideas section of the Innovation Center’s website.

We have made significant progress in developing these models, and will continue to engage

physicians, payers, employers, states, and other stakeholders in our efforts.

We are testing a variety of models through the Innovation Center that could help provide an

improved payments system while improving care quality, coordinating care, and reducing the

total cost of care. Many of these models are physician led. For example, the Comprehensive

Primary Care Initiative is a multi-payer initiative where CMS pays primary care providers

monthly care management fees for comprehensive care management on top of their regular

Medicare fee-for service payment. After two years, CMS offers the providers the chance to

share in any savings they generate. Other payers, often including Medicaid, are also providing

enhanced payment for primary care services in alignment with this program.

Another model we are testing is an Accountable Care Organization (ACO). The development of

ACOs is one of the Affordable Care Act’s key reforms to improve the delivery of care. ACOs

are groups of doctors and other health care providers that have agreed to work together to treat

beneficiaries and better coordinate their care across care settings. They share – with Medicare –

a portion of savings generated from lowering the growth in health care costs while furnishing

high quality care including providing patient-centered care.

Working in concert with the Medicare Shared Savings Program (Shared Savings Program),

which is a permanent part of the Medicare program, the Innovation Center is testing two

alternative ACO models—the Pioneer and Advance Payment model ACOs—both of which can

inform future changes to the Shared Savings Program. The Innovation Center designed the

Pioneer ACO model for health care providers that have experience coordinating care for patients

across care settings. This model tests alternative payment models that include increasing levels

of financial accountability. Thirty-two organizations are testing the Pioneer ACO model.

The Advance Payment ACO model examines whether and how pre-paying a portion of future

shared savings could increase participation in the Shared Savings Program from entities such as

physician-owned and rural providers with less capital. Through this ACO model, selected

participants receive upfront and monthly payments, which they can use to make important

investments in their care coordination infrastructure. We expect that the assistance the Advanced

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Payment model provides to smaller and rural practices will result in expanding access to this

coordinated care effort to more fee-for-service Medicare beneficiaries. Thirty-five ACOs are

participating in this model.

Finally, the Bundled Payments for Care Improvement initiative is comprised of four broadly

defined models of care, which link payments for multiple services beneficiaries receive during an

episode of care. We think episode-based payment has great potential to transform the delivery

system. We are confident that these initiatives will enable the Congress to build a reformed

physician payment system.

Question 7

What do you think is the most pressing issue facing the Medicare program today? What

are your biggest concerns around Medicaid? How is CMS planning to address these

issues?

Answer: I have three primary focuses for moving this agency forward:

1. We need to operate CMS as a business and act like business partners. This means having

an “open door policy” to work together and listen to the concerns of all the groups we

work with and work for: beneficiaries, taxpayers, providers, hospitals, members of

Congress, states, advocacy groups, insurance companies and our own employees and

contractors.

2. We have a responsibility in the months ahead to implement key pieces of legislation to

ensure all Americans have access to affordable healthcare coverage, whether it is through

the Health Insurance Marketplace, Medicaid, original Medicare, or Medicare Advantage.

3. We need to leverage the tools Congress has provided us to both reduce overall costs of

care and improve the healthcare delivery system. These tools include new payment

strategies connected to performance, new models of care, and enhanced tools to combat

fraud.

Questions from Senator Hatch

Question 1

Regarding Agency Coordination and Inter-Departmental Implementation: It is my

understanding that all agencies supplying information for the Federal Data Services Hub

have signed service level agreements. Please provide a date for when those agreements

were signed by each agency and a copy of each agreement, but have yet to receive a

response.

Answer: In order to exchange data among federal agencies, CMS needs to establish a series of

agreements, business processes and formatting rules and protocols to ensure that data is

exchanged securely and that interfaces between the federal data services hub and our partner

agencies work properly. There are multiple types and levels of agreements that work together to

facilitate the exchange of data. These include:

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Service Level Agreements, which establish procedures for mutual cooperation between

the relevant organizations;

Business Service Definitions, which ensure that cross agency business processes and data

sharing are based on common understandings so that technology decisions and that

agency systems development efforts are in-sync;

Interface Document Controls, which provide a common set of formats, methods, and

protocols to effectively define the interface between the Data Services Hub and other

partner federal organizations.

CMS began formalizing these processes and rules with our federal partners in July of 2011 and

has refined and updated them as the work to design and build the necessary interfaces has

progressed.

Question 2

CCIIO has indicated is an inter-departmental working group that includes a wide range of

Federal agencies. Please provide a list of the agencies that are members or participants of

the inter-departmental working group.

Answer: The purpose of the inter-departmental working group is to leverage available resources

across the federal government to ensure that the goals of the Affordable Care Act are met. Since

a wide variety of agencies may come into contact with uninsured individuals, they can help CMS

reach the broadest audience possible. Below is a list of the agencies or operating divisions:

Department of Agriculture

Department of Commerce

Department of Defense

Department of Education

Department of Health and Human Services

Substance Abuse and Mental Health Services Administration

Centers for Medicare & Medicaid Services

Department of Homeland Security

Department of Housing and Urban Development

Department of Justice

Department of Labor

Department of State

Department of Transportation

Department of Treasury - Internal Revenue Service

Department of Veterans Affairs

Census Bureau

Corporation for National and Community Service

Environmental Protection Agency

Executive Office of the President

General Services Administration

Government Accountability Office

Office of Management and Budget

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Office of Personnel Management

Office of National Drug Control Policy

Small Business Administration

Social Security Administration

U.S. Agency for International Development

United States Postal Office

Question 3

The implementation of Exchanges requires the development of complex software and data

systems that determine eligibility, facilitate enrollment and manage conversations with the

States and territories. Please explain how the Administration has organized itself to

implement the Exchange undertaking. Specifically, who has authority to finalize decisions

related to policy issues, for translating those decisions into operational requirements, for

communicating those decisions to the States and for executing the necessary interfaces with

different State systems?

Answer: Marketplace implementation activities follow the same decision and clearance process

as other activities relating to CMS programs where decisions are made by CMS leadership and

then executed by various components within CMS. The work of implementing the Marketplace

crosses several components in CMS. The Center for Consumer Insurance Information and

Oversight (CCIIO) is responsible for implementing many provisions of the Affordable Care Act

through developing regulatory guidance and coordinating the business side of building systems.

The Office of Information Services (OIS) works in collaboration with CCIIO to develop the IT

infrastructure of the Marketplace systems. The Center for Medicaid and CHIP Services (CMCS)

is responsible for implementing provisions of the ACA affecting Medicaid and CHIP programs.

In addition, Marketplace implementation requires cross-component work with the Office of

Grants and Management (OAGM), which is responsible for all contracts, and the Office of

Communications (OC), which manages the public-facing component of the Marketplace.

Question 4

By what date do you intend to have final the development of all of the necessary software,

the building of all necessary Federal information technology (IT) infrastructure and the

resolution of all database connectivity issues between Federal agencies and between the

Federal government and the States and territories? Is this timeline consistent with the

timelines that are considered standard industry practice for an undertaking of this nature?

Have you built in a margin of error for various types of problems that may not be

anticipated at this time but are common in a project of this scope and breadth, such as

interoperability issues or software glitches?

Answer: By September 2013, CMS intends to have finalized the development and testing of the

information technology infrastructure for the Federally-facilitated Marketplace, as well as for the

Data Services Hub. Testing has already begun and is ongoing, which will ensure sufficient time

to address any problems that may arise.

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Question 5

Will the eligibility determination for cost-sharing reductions (CSR) be aligned with the

same eligibility criteria used by the Internal Revenue Service (IRS) for advance premium

tax credits (APTC)? How will CSR payments be administered?

Answer: Section 1402 of the Affordable Care Act provides for the reduction of cost sharing for

certain individuals enrolled in a QHP through a Marketplace, and section 1412 provides for the

advance payment of these reductions to issuers. Section 1402 further provides that eligibility for

cost-sharing reductions is tied to eligibility for the premium tax credit, and uses the same

methodologies for household size and household income as are specified for the premium tax

credit. As finalized in the 2014 Payment Notice (78 FR 15410), issuers will reduce cost sharing

for essential health benefits for individuals with household incomes between 100 and 250

percent of the Federal poverty level (FPL) who are enrolled in a silver level QHP through an

individual market Exchange and are eligible for advance payments of the premium tax credit.

The statute also directs issuers to eliminate cost sharing for Indians (as defined in section 4(d) of

the Indian Self-Determination and Education Assistance Act) with a household income at or

below 300 percent of the FPL who are enrolled in a QHP of any “metal” level (that is, bronze,

silver, gold, or platinum) through the individual market in the Exchange.

Question 6

How is CCIIO ensuring a level playing field with qualified health plans (QHPs) and Multi-

State Plans (MSPs) offered under the Multi-State Plan program (MSPP) since the law

states that the Office of Personnel and Management (OPM) has the authority to modify the

requirements of plans as it relates to essential health benefits, actuarial value and

numerous other authorities allowing for different plan standards?

Answer: CCIIO is working closely with the Office of Personnel Management (OPM), which is

charged by Section 1334 of the Affordable Care Act with implementing the Multi-State Plan

Program (MSPP). The goal of the MSPP is to foster competition among plans in the individual

and small group health insurance marketplaces in all states and the District of Columbia, without

providing a competitive advantage or disadvantage to the Multi-State Plans (MSPs).

Accordingly, OPM has established working relationships with officials in state regulatory

agencies and Marketplaces.

OPM has also established a dispute resolution process by which a state may request that OPM

reconsider a determination that a state law does not apply to MSPs or MSPP issuers. This

process will offer a formal avenue for states to raise concerns about the MSPP to OPM and to

have those concerns adjudicated. CCIIO is working closely with our colleagues at OPM to

ensure a level playing field with QHPs in the Marketplace.

Regarding Federally-facilitated Exchange (FFE) Infrastructure and Operations:

Information provided by CCIIO in response to my requests for information on the FFE

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has been insufficient. Below is a list of requests I have made that have either not been

answered or not answered in full. Please provide the following information:

a) An annual budget estimate to maintain the FFE, including funding from user fees,

mandatory accounts and appropriated accounts.

Answer: The President’s FY 2014 requests $1.5 billion for costs related to Marketplaces,

including operation of a Federally-Facilitated Marketplace in each state that does not have its

own Marketplace by January, 2014. The President’s budget also estimates that $450 million in

user fees will be collected in FY 2014 to support these Marketplaces.

b) An accounting of all funds obligated related to the establishment of the FFE and the

Federal Data Services Hub to date.

Answer: The total spending on the FFE and Data Services Hub through March 31, 2013 is

below.

FFE and Data Hub Totals

FY 2010 $ 4,224,557

FY 2011 $ 112,656,217

FY 2012 $ 248,380,535

FY 2013 $ 28,384,919

c) A flow chart that describes what will occur once an individual application is

submitted and begins to go through the eligibility determination process all the way

through to when the application is approved.

Answer: Please see attached chart that provides an overview of the application and eligibility

process. After consumers submit their Marketplace application, the following steps occur:

1. The Marketplace IT system certifies Social Security Numbers and citizenship or

immigration status by receiving data through the Data Services Hub from the Social Security

Administration (SSA) and the Department of Homeland Security (DHS).

(Note: The Marketplace IT system and the Data Services Hub will not store or retain the data

used to certify the application. )

2. If the consumer requested help paying for health coverage, the Marketplace IT system

certifies income data by receiving data through the Data Services Hub from the Internal Revenue

Service (IRS), and confirms income data contained in IRS records.

3. With this certified data, there is a preliminary eligibility determination. A consumer can

be eligible for:

• A qualified health plan selected through the Marketplace purchased with the advanced

premium tax credit (and will therefore answer question about available employer-sponsored

coverage or access to other health insurance);

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Medicaid (and will therefore answer specific Medicaid-eligibility questions); or

CHIP (and will therefore answer specific CHIP-eligibility questions).

4. After the preliminary eligibility determination is made and the application is signed, a

final eligibility determination will be displayed. The applicant will then either proceed to the

Plan Compare section of the Marketplace or the State-specific process for Medicaid or CHIP,

depending on the final eligibility determination.

d) An outline of the operational capabilities and functions of the FFE.

Answer: The Federally Facilitated Marketplace (FFM) system enables individuals to find and

purchase affordable coverage. CMS designed the Federally Facilitated Marketplace for use in

states that do not operate a State Based Marketplace. Additionally, the Federally Facilitated

Marketplace provides those functions that are that CMS performs for all states, regardless of

whether they operate a State Based Marketplace or are part of the Federally Facilitated

Marketplace.

The FFM includes the following functions and capabilities:

Plan Management. Accept applications from issuers to offer Qualified Health Plans (QHP)

and evaluate the applications with support from CMS and state Departments of Insurance

(DOI). Display the QHPs on the Marketplace portal for consumer shopping.

Enrollment and Eligibility. Facilitate determination of individual eligibility for coverage,

including interfacing through the Data Services Hub for verifications with other federal and

state agencies such an income, citizenship, and enrollment in other health insurance

programs. Facilitate individual enrollment into a Qualified Health Plan. Accept and process

employer applications for SHOP.

Financial Management. Support financial management processes including the calculation

of advanced premium tax credits and cost sharing reductions; risk adjustment, reconciliation,

risk corridors; and reinsurance.

e) A complete list of agencies that will interact with the Federal Data Services Hub.

Answer: SSA, Treasury/IRS, DHS, VA, OPM, DoD/Tricare, Peace Corps

f) A date for when we can expect to have the Federal Data Services Hub operational

and available to stakeholders for testing.

Answer: We expect the eligibility and enrollment services the Hub performs to be ready by

October 1, 2013.

Interagency testing with federal agencies leveraging the Data Services Hub, including IRS, SSA,

and DHS began testing:

We have been engaged in functional testing with IRS since November 2012

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We have been engaged in functional testing with SSA scheduled since February 2013

We have been engaged in functional testing with DHS since February 2013

Formalized testing that includes tracking readiness indicators began in mid-March 2013

with a small group of states.

CMS will be on-boarding states for testing in approximately 4 phases starting in mid-March.

g) How CCIIO will interact with State Insurance Commissioners in FFE States that

are not implementing the law.

Answer: As CMS articulated in the May 2012 in the FFE guidance

(http://www.cciio.cms.gov/resources/files/ffe-guidance-05-16-2012.pdf), there are four guiding

principles in the implementation of the FFE. They include: commitment to consumers, market

parity, leveraging the traditional state role, and engagement with states and other stakeholders.

To the greatest extent possible, CMS intends to work with states to preserve the traditional role

and responsibilities of state insurance departments, and we will seek to harmonize policies in the

Federally Facilitated Marketplace (FFM). For example, CMS will not duplicate as part of its

QHP certification process reviews conducted by state departments of insurance under state law

and authority. CMS has been engaged in state-specific consultations with a variety of state staff,

including but not limited to staff at state departments of insurance, to plan the QHP certification

process and jointly identify potential interactions between state laws and processes and federal

standards. In addition, CMS continues to provide technical assistance to state departments of

insurance to assist these staff in preparing for the 2014 plan year.

h) If a decision is not provided in real time, how long consumers will need to wait for

the agencies to reconcile enrollment application information and make a final

decision.

Answer: We are striving to process as many applications in real time as possible. When there is

an inconsistency between an applicant’s attestation regarding a factor of eligibility and a data

source, the Marketplace, Medicaid agency, or CHIP agency will notify the individual and

provide him or her with a period of time to provide satisfactory documentation or otherwise

resolve the inconsistency. This can include working with SSA or DHS, for example, to correct

information in their records. The processes for inconsistency are laid out in the Exchange Final

Rule at 45 CFR 155.315(f). When an inconsistency is related to SSN, citizenship, or

immigration status, the applicant has 90 days to resolve the inconsistency, with the possibility of

a “good faith” extension. The statute and regulations specify that, during this period, the

applicant will receive a determination about eligibility for enrollment in a qualified health plan,

advanced premium tax credit (APTC), cost-sharing reduction (CSR), Medicaid, or CHIP. This is

also the process specified in statute for inconsistencies that are related to other factors of

eligibility for individuals who are otherwise eligible for enrollment in a QHP with or without

APTC and CSR. For inconsistencies that are related to factors of eligibility other than SSN,

citizenship, and immigration status for individuals who are otherwise eligible for Medicaid or

CHIP, pre-Affordable Care Act regulations provide for a shorter resolution period, and a

determination regarding eligibility for Medicaid or CHIP is not provided until the inconsistency

is resolved.

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i) How application data will be protected to ensure no unauthorized access to such

data.

Answer: The privacy and security of consumer data in the Marketplace is a top priority for

CMS and other federal and state agencies. Consumer data in the Marketplace is safeguarded and

secured through processes, controls, and standards that will be used not only by CMS, but also

by federal agency partners including IRS and SSA. CMS will use a layered security approach to

protect personal information which includes presentation of a secure web interface, use of secure

transmission protocols, and validation of identity. Once information is captured, it is then

protected through a wide variety of security measures and counter-measures during the entire

time the data is being used within the Marketplace. CMS also reviews its internal security

policies and procedures each year, and updates them accordingly to ensure a comprehensive

information security program is in place and remains relevant and responsive to today’s

emerging threats. In addition, CMS and IRS have worked together to develop additional

safeguards to protect sensitive tax return data that will be accessed in the Marketplace. CMS is

also making use of commercial sources of information as an additional identify-proofing

measure. This approach has been successful with other Federal government websites, such as

SSA’s MyAccount.

j) How CCIIO was able to provide an example of an individual purchasing insurance

through the FFE in 30 minutes when the exchange is not fully operational and the

eligibility determination system has yet to be built.

Answer: CCIIO has provided hypothetical examples, designed to illustrate how consumers will

interact with the Marketplace starting on October 1, 2013.

Question 8

CCIIO has identified Section 1311(d)(5)(A) of the Patient Protection and Affordable Care

Act (PPACA) as the statutory authority to collect user fees and indicated that funds

provided through the user fee will be used for “qualified health plan certification,

administration of APTCs, cost-sharing reductions, Navigators, and other functions.”

Please provide a complete list of what CCIIO means by “other functions.”

Answer: CMS will collect a 3.5 percent of premium user fee on participating issuers in the FFE

as specified in the final 2014 Payment Notice, available at 78 FR 15410. The user fees funds the

following:

Provision of consumer assistance tools;

Consumer outreach and education;

Management and operation of a Navigator program;

Oversight of agents and brokers;

Eligibility determinations;

Administration of advance payments of the premium tax credit and cost-sharing reductions;

Enrollment processes;

Certification processes for QHPs (including ongoing compliance verification, recertification

and decertification); and

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Administration of a SHOP Exchange.

Question 9

CCIIO has indicated in testimony before this Committee that States are given options

between whether the Exchange is an active purchaser or a passive market facilitator, and

other specific policy decisions that are left up to the State related to accreditation and

additional QHP standards. When will CMS outline the decision of the FFE as it relates to

the options left up to each individual Exchange? Will the decision be made in coordination

with each of the 26 FFE States? Will the decision be different for each of the 26 States?

Answer: CMS outlined the FFE purchasing policy for 2014 on May 16, 2012

(http://cciio.cms.gov/resources/files/ffe-guidance-05-16-2012.pdf). To ensure a robust QHP

market in each state where an FFE operates, and to promote consumer choice among QHPs, in

the first year, HHS intends to certify as a QHP any health plan that meets all certification

standards. HHS will analyze the QHP certification process and may identify improvements or

changes to this process, as appropriate.

CMS released the Letter to Issuers outlining our planned approach for QHP certification, and

how CMS will interact with states in the FFE and Partnerships. As noted in previously released

guidance, Plan Management State Partnership Marketplaces have some flexibility in their

application of QHP certification standards. States in which a State Partnership Marketplace is

operating may use CMS’s planned approach to conduct QHP certification reviews and arrive at

certification recommendations, or adopt another approach that is consistent with the federal

standards.

CMS does not intend to duplicate reviews of potential QHPs conducted under state authority or

as part of a state’s enforcement of 2014 market reforms (e.g., essential health benefits and

actuarial value standards). CMS expects that states will enforce 2014 market reforms;

accordingly, CMS expects to rely on states’ reviews of market reforms as part of its QHP

certification process.

CMS is committed to stakeholder consultation as we implement the Affordable Care Act. We

have undertaken extensive stakeholder consultation during the Marketplace rule making process,

and solicited comments on Federally Facilitated Marketplace guidance. We will enhance our

outreach and education efforts as we move toward open enrollment in 2013 and will seek to join

state and local partners in that effort.

Question 10

CCIIO has indicated that they are considering contingency plans for “every eventuality.”

Please provide a comprehensive list of eventualities and contingency plans that CCIIO is

analyzing and developing.

Answer: We are moving forward with Marketplace implementation for open enrollment

beginning on October 1, 2013. We are also working with states to provide the maximum amount

of flexibility to enable them to perform the functions in their Marketplaces. A number of

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different systems will be in place by October 1 to accommodate open enrollment, including IT,

call center, and plan management systems, and we are carrying out the plans we have in place to

ensure that all of these systems are operational and that the Marketplace will be available to all

consumers on October 1.

We are also developing mitigation strategies for IT systems as provided in the guidance

established by the National Institute of Standards and Technology, Special Publication 800-34,

revision 1 (May 2010). The document provides guidance to help personnel evaluate information

systems and operations to determine mitigation strategy requirements and priorities.

Question 11

Are you currently planning to implement certain aspects of the Exchanges in a manner that

will require non-electronic communications, such as confirming an applicant's Medicaid

eligibility status or incarceration status with a State or confirming immigration status or

tax credit eligibility with Federal agencies? Can you provide a list organized by State of

which of the various functionalities you expect to carry out on a non-electronic basis?

Answer: The Affordable Care Act set up a system of coordinated, streamlined processes to

determine eligibility for enrollment in a qualified health plan, advance payments of the premium

tax credit, Medicaid, or CHIP. Marketplaces must first rely on electronic data to verify

eligibility. CMS expects that that the majority of transactions related to eligibility determinations

will be electronic. Specifically, with respect to incarceration status, 45 CFR 155.315(e) specifies

that Marketplaces must verify applicant attestations regarding incarceration status by relying on

electronic data sources; however, if an approved electronic data source is not available, the

Marketplace must accept the applicant’s attestation regarding incarceration status without further

verification, unless it is not reasonably compatible with information from other approved data

sources. If the attestation is not reasonably compatible with information from approved data

sources, the Marketplace must follow the inconsistency resolution procedure provided at 45 CFR

155.315(f), which is also the procedure for verifying information any time required electronic

data is not available.

Question 12

How will manual enrollment work under the FFE model if some of the necessary activities

to enroll an individual either cannot be accomplished in real time, require certain steps to

verify information, or the individual chooses to not enroll through the FFE website? Who

will be conducting manual enrollment activities? What percent of enrollees be required to

go through a manual enrollment process?

Answer: In addition to the dynamic Web-based system supporting eligibility determinations for

all insurance affordability programs, a paper application will be available, and eligibility workers

will handle exceptions and manual processing, including for paper applications and in cases

where verification documentation is needed (e.g., immigration documents).

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CMS will provide consumer support to help purchasers of health insurance obtain an eligibility

determination and select a plan through the FFE. CMS will fund a Navigator grant program in

FFE states to provide consumers with fair, unbiased help with determining if they are eligible for

tax credits, comparing QHPs, and the application process for health coverage. Training modules

are under development and Navigator grants will be awarded in the summer of 2013.

CMS will launch a website with chat capabilities and a 24 hour call center for the Marketplace

that consumers can use to identify and compare QHPs, check their eligibility for affordability

programs to help them pay for coverage, and enroll in a QHP. As with all Marketplaces,

consumers will be able to submit an application online, over the phone, through the mail, or in

person at certain locations.

Question 13

In a meeting with members of the Committee, Secretary Sebelius indicated that the Federal

Data Services Hub is 40% complete and that a contract will soon be signed established

eligibility determinations and enrollment processes. As you are well aware, multiple

systems must be complete for open enrollment on October 1. Taking into account all

systems necessary for a person to access the FFE website to enrolling an individual in a

QHP, what is the total progress to date in having the system 100 percent complete by

October 1?

Answer: CMS is creating and integrating several systems to support the business processes

necessary for open enrollment on October 1: the Federally Facilitated Marketplace (FFM)

system; the Federal Data Services Hub (the Hub); and Marketplace Data Warehouse and

Analytics (MIDAS) system. The first major component of the FFM and DSH systems, Qualified

Health Plan (QHP) applications, is now complete. The infrastructure for the data hub has been

completed and testing has been successful. We met our April 1 deadline for allowing issuers to

submit QHP applications, and states have successfully used the Hub in testing. We expect each

of these systems to be fully operational and interoperable by open enrollment on October 1.

Question 14

Regarding the Federal Data Services Hub: Please provide a comprehensive list of all

categories of data that will be routed through the Federal Data Services Hub.

Answer: The following categories of data will be routed through the Federal Data Services

Hub:

• Identity Proofing

• SSN validation

• Income and Family Size

• Calculation of Maximum Tax Credit Amounts

• Citizenship and Immigration Status

• Enrollment in Insurance Affordability Programs and Qualified Health Plans

• Enrollment in Minimum Essential Coverage

• Incarceration Status

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Question 15

Please provide a comprehensive report on Federal Data Services Hub testing activities,

including a list of all tests, the date of the test, which agency or stakeholder tested the data

hub in each event, the results of each test and when testing will be complete.

Answer: CMS is also working with our partners on external testing. CMS is undertaking

‘Secure Communications’ and the ‘FEPS and Partner’ functional testing with the IRS, which has

been ongoing since October 2012. These tests have been successful in testing the services

between IRS and CMS.

The following federal agencies will begin similar testing in Spring 2013:

• Department of Homeland Security (DHS)

• Internal Revenue Service (IRS)

• Office of Personnel Management (OPM)

• Peace Corps

• Social Security Administration (SSA)

• TRICARE Management Activity (TMA)

• Veterans Health Administration (VHA)

Several State Based Marketplaces and Federally-facilitated Marketplace states will begin ‘Secure

Communications’ and ‘FEPS and Partner’ in the spring of 2013. All states will participate in the

‘Regression and End to End’ Testing in August 2013. Plan issuers are scheduled to begin testing

plan management templates in the spring of 2013.

Together, internal and external testing will validate system functionality. Performance Stress

Testing will examine infrastructure capacity and scalability with the most active trading partners.

Security Testing will take place in the same manner as with all CMS systems. We have

dedicated significant resources and personnel to work with developing a robust testing

infrastructure that will allow for testing to occur once the system is operational.

Question 16

Regarding the QHP Approval Process: It is my understanding that all QHPs, regardless of

the exchange model, will be submitting plan and rate information to HHS through the

Health Insurance Oversight System (HIOS). Can you please provide information on the

capabilities and functions of HIOS? I am also interested in how HHS will be using the

information collected from plans through HIOS. It has been said that information will be

used to certify health plans, but that it will also be used for “other purposes.” Please

provide a comprehensive list of all “other purposes,” and the statutory authority provided

to use data for those purposes.

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Answer: CMS issued the final Letter to Issuers modeled after the Medicare Part D program call

letter. In this letter, we outlined specific application requirements and the appropriate electronic

system for QHP certification applications.

In states with Federally-facilitated Marketplaces, an issuer can submit QHP certification

applications in HIOS between April 1, 2013 and April 30, 2013. The QHP application will

collect both issuer-level and plan-level benefit and rate data and information, largely through

standardized data templates. Applicants will also attest to their adherence to the regulations set

forth in 45 CFR parts 155 and 156 and other programmatic requirements.

In a Plan Management State Partnership Marketplace, issuers will work directly with the state to

submit all QHP issuer application data in accordance with state guidance. Most states are using

the SERFF system to collect and review QHP data. The state will review issuer applications for

QHP certification for compliance with the standards described above and will provide a

certification recommendation for each plan to CMS. In Partnership states, CMS will review and

confirm the state’s recommendations, coordinate Plan Preview, make final certification

decisions, and load certified QHP plans on the Marketplace website for the relevant State

Partnership Marketplace. CMS will work closely with states to coordinate this process.

The legal authority for any specific data collection has been articulated in rule making and

guidance. Sections 1301 and 1311 of the Affordable Care Act contain the authority for QHP

certification.

The Health Insurance Oversight System (HIOS) has been used for various requirements in the

Affordable Care Act such as www.healthcare.gov web submission, the medical loss ratio reports,

and the rate review program for example. Most issuers and states are familiar with the system

and have already registered in HIOS. The system has multiple functional modules and has the

capability of accepting QHP certification applications.

Question 17

What considerations were taken into account in determining the QHP approval timeline?

Have you heard any concerns from stakeholders regarding the uncertain and short period

of time between plan approvals and open enrollment?

Answer: CMS has solicited comment on the QHP certification approval time-frame on multiple

occasions. We have worked with issuers, states, and other stakeholders to make certain that

consumers in the new Marketplaces have robust choice of plans.

Most recently, CMS solicited comments on the draft Letter to Issuers. In the final Letter, issued

on April 3, 2013, CMS expressed willingness to work with issuers to provide them with

additional time during the resubmission window. To prepare for this first year of operation, we

must sign QHP certification agreements in early September 2013, to display benefits and rates to

consumers in time for open enrollment to begin on October 1, 2013.

Question 18

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Regarding Program Integrity: The healthcare Exchanges represent the largest program

expansion in healthcare since the Federal healthcare programs were created. Given the

vast amounts of healthcare fraud that exist under current programs, with estimates of at

least $60 billion being lost each year to healthcare fraud, what program integrity efforts

has Centers for Medicare and Medicaid Services (CMS) embedded as part of the

infrastructure of the FFE? Are there similar efforts being implemented at the State level

with respect to State Exchanges or the Partnership Exchanges? Are there any

requirements for program integrity efforts included in either the Federal Exchange or

Partnership Exchange guidances or regulations issued to date? Is there a comprehensive

program integrity plan in place for addressing vulnerabilities in the Federal and/or State-

based Exchanges? Which entity within CMS is coordinating those efforts? How is

information obtained from early detection or other program integrity efforts being shared

within CMS and what is the plan for developing corrective actions when those instances are

identified? How are CMS’ program integrity efforts being coordinated with the IRS?

Answer: CMS takes seriously its responsibility to monitor the implementation of these

programs to protect consumers, prevent fraud and abuse, and ensure the programs achieve their

goals. In addition to the program integrity efforts underway within CMS, CMS and IRS are

working on a number of key operational issues which include program integrity matters. We

will provide further detail on the oversight of Marketplace programs in future rulemaking and

guidance.

In states in which a federally-facilitated Marketplace is operating, CMS will focus on compliance

concerns that are specific to the Marketplace and will look to existing state compliance and

enforcement efforts for issues that fall under states’ regulatory and enforcement authority.

Question 19

A good example of where program integrity will be critical is with respect to eligibility

determinations. For those States under the FFE, there are two options: 1) let the FFE

make all decisions of eligibility determinations or 2) let the FFE obtain the application and

provide an assessment to the States, and the States can make the ultimate eligibility

assessment. However, in both cases, my understanding is that the Exchanges will rely

100% on the individual to self-disclose that they live in the State they claim to live in.

While this may improve customer experience and make subsidies more easily accessible,

numerous Office of Inspector General (OIG) and the U.S. Government Accountability

Office (GAO) reports have shown the fraud that occurs when self-reporting is allowed in

programs of this size.

a) What steps will CMS and/or the IRS implement to verify that the self-reported

information is accurate?

Answer: With respect to residency, the Exchange final rule, at 45 CFR 155.315 (d) details

Marketplace procedures for verifying residency. These rules apply to all Marketplaces,

regardless of governance model.

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In general, Marketplaces have two options. First, a Marketplace may accept attestations that an

individual resides in a Marketplace service area. Second, a Marketplace may examine electronic

data sources that are available to the Marketplace for this purpose, based on evidence showing

that such data sources are sufficiently current and accurate, and minimize administrative costs

and burdens.

If an Marketplace chooses to accept attestations regarding residency, the regulations provide that

if residency information provided by an applicant is not reasonably compatible with other

information provided by the individual or in the records of the Marketplace (e.g. information

from last year’s eligibility determination), the Marketplace must examine available data sources.

If this data matching cannot reconcile the discrepancy, the Marketplace must notify the

individual and request an explanation or documentation. CMS will provide additional guidance

in the future regarding policies and procedures for data matching.

b) If a recipient falsifies an application and receives tax credits, who will investigate

that fraud?

Answer: Under section 1411 (h) of the Affordable Care Act, the Secretary of Health and

Human Services may impose civil penalties on any person who fails to provide correct eligibility

information if such failure is attributable to negligence or disregard of rules and regulations.

Question 20

Regarding Risk Programs: The proposed regulation pertaining to the Notice of Benefit

and Payment Parameters eliminates the option for States to operate the temporary

reinsurance program. Why was this change made? What stakeholder comments were

taken into account in making this determination? Why are reinsurance funds collected

and distributed nationally? Will not this lead to lower-cost States, like Utah, subsidizing

higher-cost States?

Answer: The final 2014 Payment Notice (78 FR 15410) does not eliminate the option for states

to operate the temporary reinsurance program. States still retain this option under 45 CFR §

153.210. The Affordable Care Act directs that a transitional reinsurance program be established

in each state to help stabilize premiums for coverage in the individual market. The reinsurance

program is designed to alleviate the need to build into premiums the risk of enrolling individuals

with significant unmet medical needs and to lower premiums across the country.

Federal collections will leverage economies of scale, reducing the overall administrative costs of

the reinsurance program. The final payment policy provides reinsurance payments in an

efficient, fair, and accurate manner, where they are needed most, to effectively stabilize

premiums nationally. The cost of medical care is one variable, but CMS analysis indicates that

other variables are also important. The extent to which issuers receive payments under the

reinsurance program depends on their actual claims experience in plan year 2014.

Question 21

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Regarding State Coordination: In public statements and guidance documents, CMS has

said that it will try to harmonize Exchange policy with existing State programs and laws

whenever possible. However, with 26 States relying on the FFE, limitations on resources

and time running out, it would seem difficult for the agency to tailor an Exchange to meet

each State's unique insurance market needs. What are the specific details of the plan to

harmonize these laws and regulations in States under the FFE model? What are the

necessary steps to ensure FFEs will be available to consumers in the 26 States as it relates

to harmonizing State laws and regulations?

Answer: CMS has been coordinating plan management activities with states, including QHP

certification, monitoring and oversight, account management, and recertification. States that are

enforcing market-wide standards that are part of QHP certification will be able to submit their

findings for the Federally Facilitated Marketplace for use in its QHP certification reviews; the

Federally Facilitated Marketplace does not intend to duplicate those reviews. The Federally

Facilitated Marketplace will work with the state to review the state’s recommendation and to

provide a coordinated application process.

CMS has worked with the National Association of Insurance Commissioners to standardize the

collection of data needed to certify qualified health plans. We have also already released the

data elements that insurance plans will need to integrate into this application. CMS will continue

to work with states to ensure coordination with state eligibility processes.

The Marketplace developed by CMS will be adapted to meet the needs of any state that chooses

to utilize this model. The Federally Facilitated Marketplace will support the following operation

functions; Eligibility and Enrollment, Plan Management, Financial Management, and Consumer

Support.

CMS is already testing IT data information exchange functions and expects to complete testing

in the spring of 2013. Consumer call centers are on track to open in the summer of 2013.

CMS is committed to stakeholder consultation as we implement the Affordable Care Act. We

have undertaken extensive stakeholder consultation during the Marketplace rule making process,

and solicited comments on FFE guidance. We have also begun consultation specifically in the

Federally Facilitated Marketplace and partnership states through our regional offices. We will

enhance our outreach and education efforts as we move toward open enrollment in 2013 and will

seek to join state and local partners in that effort.

Question 22

It is anticipated that plans will begin submitting QHP applications starting March 28th for

approval either through the National Association of Insurance Commissioners’ (NAIC)

System for Electronic Rate and Form Filing (SERFF) and through HHS’s Health

Insurance Oversight System (HIOS). Can you please explain the purpose behind plans

submitting QHPs to both systems in States with State-based Exchanges? Is this not

duplicative, unnecessary, contrary to the goals of limiting administrative costs and an

encroachment of State authority to regulation insurance in the State?

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Answer: CMS issued the final Letter to Issuers modeled after the Medicare Part D program call

letter. In this letter, we outlined specific application requirements and the appropriate electronic

system for QHP certification applications.

In states with Federally-facilitated Marketplaces, an issuer can submit QHP certification

applications in HIOS between April 1, 2013 and April 30, 2013. The QHP application will

collect both issuer-level and plan-level benefit and rate data and information, largely through

standardized data templates. Applicants will also be required to attest to their adherence to the

regulations set forth in 45 CFR parts 155 and 156 and other programmatic requirements.

In a Plan Management State Partnership Marketplace, issuers will work directly with the state to

submit all QHP issuer application data in accordance with state guidance. Most states are using

the SERFF system to collect and review QHP data. The state will review issuer applications for

QHP certification for compliance with the applicable standards and will provide a certification

recommendation for each plan to CMS. CMS will review and confirm the state’s

recommendations, coordinate the plan preview period during which issuers may review their

QHP data before it becomes public, make final certification decisions, and load certified QHP

plans on the Marketplace website for the relevant State Partnership Marketplace. CMS will

work closely with states in State Partnership Marketplace to coordinate this process.

Question 23

Regarding Application Counselors: The latest proposed regulation creates a new category

of assisters called “Application Counselors.” The proposed regulation says these assisters

could be in hospitals or other provider offices. Can you shed more light on what role these

Application Counselors will play? What would prevent such a counselor in a hospital from

steering people to plans that benefit the hospital?

Answer: We believe that making such assistance available for the Marketplaces will be critical

to achieving a high rate of enrollment. Accordingly, the proposed regulation seeks to ensure that

application counselors will also be available in the Marketplace to help individuals and

employees apply for enrollment in Marketplace coverage and for insurance affordability

programs. Under the proposed regulation, certified application counselors would provide help to

consumers in applying for health insurance in the Marketplace beginning on October 1, 2013.

These counselors would serve as resources that individuals could turn to for help with filling out

their applications and exploring their coverage options. Many organizations, like hospitals,

community health centers and other social service organizations, already employ individuals in a

similar capacity. These individuals, for example, may assist in patient registration, with the

objective of determining eligibility for medical coverage under the terms of various private and

public health care and financial assistance programs including Medicaid and Medicare to

facilitate patient care.

The proposed rule also would requires that these counselors act in the best interest of the

consumer, and mandates that they will would be trained regarding qualified health plan options,

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insurance affordability programs, eligibility, and benefits rules and regulations governing all

insurance affordability programs operated in the state, as implemented in the state, prior to

providing assistance. CMS is currently developing this training, and it will begin this summer.

Question 24

Regarding Outreach and Education: What source of funding provided under PPACA or

other laws will be used to fund outreach and education activities? What is the total budget

for outreach and education activities? Will CMS fund outreach and education activities for

all states, or just those under the FFE model?

Answer: The President’s Budget for FY 2014 requests $554 million for Marketplace-related

Consumer Information and Outreach. We expect that other forms of consumer engagement,

such as traditional and social media, will promote awareness of new insurance options across the

nation. This funding will primarily support efforts in the Federally-facilitated and Partnership

Marketplaces such as the Marketplace Contact Center and Navigator grants.

Question 25

Are you developing a communications plan to guide the public and manage expectations

prior to the October 1 or January 1 deadline for enrollment and coverage? If so, please

provide a copy of the plan with the Committee?

Answer: CMS is developing and implementing an outreach and education plan to help ensure

that Americans have access to quality, affordable health insurance. The plan seeks to raise

awareness of the Marketplace as the official, objective source for finding affordable health

coverage. A timeline describing the plan is attached.

Question 26

Regarding Pre-existing Conditions Insurance Plan (PCIP) program: The President's

budget indicates that the PCIP program a total of $312 million in total unobligated

balances but $937 million in total outlays. Given the flexibility under the law to address

budget shortfalls, what plans does CMS have in place to ensure the program is funded

through December 31, 2014?

Answer: CMS is aggressively managing costs in the federal PCIP program and has taken a

variety of steps to ensure that the limited funds provided by the Affordable Care Act are applied

efficiently in funding patient care and program administration These include a change in

provider networks used by the federally-administered PCIP, reducing both its negotiated and out-

of-network payment rate for providers; negotiation of additional discounts on reimbursement

rates with targeted hospitals that were treating a disproportionate number of PCIP enrollees;

limiting the specialty drug benefit to provide coverage only if the specialty drug is dispensed by

an in-network pharmacy, and consolidation of three benefit plan options into one, increasing the

maximum out-of-pocket limit from $4,000 to $6,250 for in-network services. In February and

March 2013, the PCIP program suspended enrollment to manage costs in the last year of the

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program as another step to ensure that current enrollees will have coverage through December

31, 2013.

Question 27

Regarding Enrollment Process: Please explain how the Federal Data Services Hub,

Exchanges (of any type) and Medicaid eligibility system will interact.

Answer: When consumers access the Marketplace and fill out the single, streamlined

application, the information they provide, including income information, will, via the Hub, be

verified against other sources of information, including the IRS, DHS, and SSA. The Federally-

facilitated Marketplace will also use the Hub to connect to state Medicaid agencies to check

whether an applicant is already enrolled in Medicaid. In the Hub, data will be routed through but

not stored in the system, while ensuring that the data flows where it is needed. The Hub will

access only the information needed to determine individual eligibility and will not be involved in

the selection or certification of health plans. CMS has completed the Hub’s technical design, has

almost completed the services related to Federal and state agency interactions, and has already

begun testing the Hub across agencies. For the Federally-facilitated Marketplace, when an

applicant is assessed or determined eligible for Medicaid, the Hub will be used to transfer the

applicant’s information to the state Medicaid agency to complete the process.

Question 28

Regarding Data Security and Privacy: CMS has indicated that information provided in

the streamlined application will be subject to strong privacy and security protections, that

IRS data used to verify eligibility through the Federal Data Services Hub will be used in a

manner consistent with existing IRS safeguards and that the agency has completed the

framework for security across agencies to establish protocols for connectivity. Could you

please elaborate on how information provided through an application, to the IRS for

eligibility determinations and as other data shared between agencies will be protected from

unauthorized uses?

Answer: The privacy and security of consumer data is a top priority for CMS and other federal

and state agencies. Consumer data is safeguarded and secured through processes, controls, and

standards that will be used not only by CMS, but also by federal agency partners including IRS

and SSA. CMS will use a layered security approach to protect personal information. This

layered approach includes presentation of a secure web interface, use of secure transmission

protocols, and validation of identity. Personal information is protected through using a variety of

security measures and counter-measures during while the data is being used within the Hub.

CMS also reviews its internal security policies and procedures each year, and updates them to

ensure a comprehensive information security program is in place and remains relevant and

responsive to today’s emerging threats. In addition, CMS and IRS have worked together to

develop additional safeguards to protect sensitive tax return data that will be accessed through

the Hub. CMS is also making use of commercial sources of information as an additional

identify-proofing measure. This approach has been successful with other Federal government

websites, such as SSA’s MyAccount.

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Question 29

Regarding Navigators: CMS recently published a $54 million funding announcement to

eligible self-employed individuals and private and public entities applying to serve as

Navigators. How many Navigators did CMS estimate will be trained in determining the

amount to transfer from the Prevention and Public Health Fund to the Navigator

program? What is the target number of Navigators needed to enroll the estimated 7

million new enrollees in exchanges? What is the target Navigator to enrollee ratio and how

will the Administration ensure that training continue to meet the demand as the number of

exchange-enrollees increases over time?

Answer: Navigators are charged with providing impartial education and guidance to consumers

about the public and private health insurance options available to them in the Marketplaces.

Navigators will play a significant role in enrolling Americans in coverage and in ensuring that all

consumers who need customer service can receive it from trained professionals.

The Funding Opportunity Announcement (FOA) is available for self-employed individuals, as

well as public and private organizations that are interested in becoming Navigators in the

federally facilitated and state partnership Marketplaces. At this time CMS has not estimated the

total number of Navigator grantees and applicants or the number of that will receive funding

through the FOA, although the regulation governing the Navigator program, 45 CFR 155.210,

requires that at least two types of entities serve as Navigators in each Marketplace service area,

and that at least one of those entities be a community and consumer-focused nonprofit

CMS apportioned $54 million for the FOA based on the total number of uninsured (under age

65) legal residents in each state with a Federally-facilitated Marketplace/State Partnership

Marketplace, with a minimum award of $600,000 available per Federally-facilitated

Marketplace/State Partnership Exchange service area. We invite public comments on the number

of Navigator grantees that would be appropriate, as well as on the number of consumers expected

to receive assistance in a particular state.

In addition to Navigators, consumers will have access to assistance through services such as a

call center, where customer service representatives can provide referrals to the appropriate state

or federal agencies, or other forms of assistance, including certified application counselors and

agents and brokers.

Question 30

Durable Medical Equipment (DME) Guidance re: Minimum lifetime requirement: In

November 2011, CMS issued a Final Rule on the Medicare Program which impacted DME.

This regulation, revised the definition of DME to add a 3-year “minimum lifetime

requirement” (MLR). As a result, items classified as DME after January 1, 2012, must

have an expected life of at least three years. In subsequent communications with Congress,

you wrote that CMS will be providing additional guidance “in the near future.” To this

date, CMS has not yet provided guidance sought by members of the Finance of the

Committee on how it will apply the Final Rule’s 3-year MLR requirement to multi-

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component devices (which may have both durable and non-durable components). When

will CMS issue a proposed rule or guidance on this important issue in order to provide

further direction and consistency to innovators?

Answer: CMS strives to promote innovation and competition while maintaining beneficiaries’

access to critical items and services. CMS is taking a thoughtful and deliberate approach with

respect to this important matter, and will be issuing more detailed guidance on this policy. We

hope to move forward as soon as we can. I am happy to work with you to address any concerns

regarding a particular product in development that may be impacted, and CMS is happy to

discuss that specific product with your constituent.

Question 31

Regarding the use of technology in new provider payment arrangements: The Accountable

Care Organization pilot program and other bundling initiatives being deployed by CMS

use “benchmarks” that are determined using historical data. Due to this lag, they could

penalize doctors that use cutting edge treatments and technologies that are more clinically

appropriate for the patient or bring more value and better care outcomes over the longer

term. Is there a comparable danger that ACOs and bundling will create incentives to stint

on care? Are there technical modifications that can be made to the program that will

neutralize the disincentives providers face when they want to use breakthrough treatments

and technologies that are more expensive than the standard of care in the short run but will

bring higher value to patients in the long term? Could time-limited technical adjustments

to benchmarks be permitted to ensure that providers are not penalized by providing

patient care with new technologies?

Answer: Medicare accountable care organizations (ACOs) and organizations participating in

the Bundled Payments for Care Improvement initiative must meet rigorous standards for care

quality and beneficiary satisfaction. To assess the quality of care furnished by the organizations

and safeguard against stinting of care, CMS has created a vigorous monitoring program that

includes asking beneficiaries about their experiences as well as measurement of the quality

provided by participating organizations. ACOs and organizations participating in the Bundled

Payments for Care Improvement initiative must achieve certain quality thresholds in order to

continue participating in the initiatives.

Beneficiaries retain their original Medicare benefits and may choose to receive care from

providers not participating in the initiative. Nothing in the initiatives will in any way restrict the

ability of beneficiaries to access care from participating or non-participating providers, nor will it

restrict the ability of participating ACOs to offer the latest medical technologies.

We will continue to carefully assess the progress of our ACO program and we welcome your

continued input on how we can improve the program.

Question 32

Regarding Molecular Diagnostic Coverage and Payment: Medicare contractors have been

establishing payment rates for 2013, but we understand that the methodology used by the

contractors lacks transparency. What steps is CMS taking to provide greater clarity

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regarding the methodology used to establish specific payment rates, such that interested

stakeholders are able to clearly understand how the rate was derived? Is there a way to

allow stakeholders to participate in this process, particularly when there is disagreement

regarding the level of payment that has been established? If not, what steps will CMS take

to provide a public process for stakeholders?

Answer: CMS uses CPT codes developed by the AMA in establishing payment rates for

Medicare services. The AMA CPT Panel developed 114 new single CPT codes to replace

multiple “stacking codes” (based on component steps) that were previously used to bill for

molecular pathology tests. The old “stacking codes” were deleted at the end of 2012 and are no

longer available.

While the new codes were issued in 2012, CMS decided to delay their use for a year to carefully

consider whether they should be paid under the physician fee schedule (as pathologists preferred)

or the clinical laboratory fee schedule (as preferred by laboratories). After requesting comments

as part of the 2013 physician fee schedule rule, we decided to keep them on the lab fee schedule,

with an additional payment available for interpretation by a pathologist. New rates for these tests

(generally genetic tests) are being established through the “gap-filling” process, which enables

the Medicare contractors to collect a wide range of relevant data. While this process is

underway, the tests are being paid interim rates set by the contractors, which may reflect invoice

amounts, old “stacking code” prices, or case-by-case determinations by the contractor medical

directors.

The local gap-fill prices will be submitted to CMS this month and will be open to public

comment for 60 days. CMS will post final prices in September, at which point stakeholders may

request reconsideration, with supporting evidence. The 2014 fee schedule, including national

limitation amounts for the new test codes, will be issued in November.

Question 33

Regarding Access to Diagnostic Imaging Services: According to data compiled by the Food

& Drug Administration in 2013, there are now 200 fewer mammography facilities and

nearly 1,000 fewer mammography scanners available to American women than in 2007,

when several major Medicare imaging payment reductions were implemented. In addition,

data from the FDA suggests that mammography imaging facilities that remained open have

cut back the scope of services offered in order to remain in practice and combat lost

revenue that resulted from reductions in payment rates. Centers for Disease Control and

Prevention data also indicates that mammography screening rates have fallen slightly over

the 2003 through 2010 period, which could attributed to a variety of causes, including

Medicare payment policies. Is CMS monitoring the impact that Medicare payment rate

cuts may be having on beneficiary access to important diagnostic imaging services, like

mammography? If not, will CMS take steps to ensure we are monitoring access to these

services for beneficiaries?

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Answer: Medicare covers screening mammograms to check for breast cancer once every 12

months for all women with Medicare age 40 and older. Beneficiaries pay nothing for the test if

the doctor or other qualified health care provider accepts assignment.

We believe access to these preventive services is important and we are monitoring access to care.

Question 34

Regarding Compounded Drugs: As we've all become aware in recent months,

compounded drugs are commonly used, but can pose serious health risks if Good

Manufacturing Procedures are not followed. Since a marked percentage of all hospital

intravenous medications and those administered in the physicians’ office are compounded

or repackaged, could you elaborate on what CMS is doing to protect beneficiaries from

risk? The CMS Benefit Policy Manual states that if FDA has determined that a drug is

compounded in violation of the Federal Food, Drug and Cosmetic Act (FFDCA), that they

do not meet the approval requirements of the Medicare program and thus not covered.

How will CMS ensure appropriate oversight of reimbursement for these types of drugs?

Answer: We share your concern for the safety of drugs used by Medicare beneficiaries. We

will continue to work with the FDA to ensure the denial of Medicare payments for compounded

drugs that violate the FFDCA.

With the exception of compounded drugs and some repackaged items, the majority of drugs paid

under Part B are commercially available, FDA approved products that are purchased by a

physician's office, administered in the office or clinic setting, and billed by the physician or other

provider.

Question 35

Regarding Short Cycle Dispensing in Long-Term Care (LTC) Facilities: Under the

Affordable Care Act, a provision was included to require so-called "short-cycling" of

certain high-cost drugs in LTC facilities in order to eliminate waste. The CMS final rule

only required short-cycle dispensing of brand name drugs. It did not require short-cycle

dispensing of low cost generics, however, because the added cost of extra dispensing

outweighed the cost benefit of reducing the wastage of cheap generic drugs. It seems

unintentional that the final rule’s definition of a “brand name” drug is being interpreted

by some plans to require short-cycle dispensing of select generic drugs that were approved

prior to 1984, before the creation of the ANDA process for approving generics, and thus, do

not have an ANDA number. Isn’t this interpretation of the policy, requiring short-cycle

dispensing for the oldest and least expensive generics, inconsistent with the goal of saving

costs for the Medicare program? What is CMS’ justification for the policy? Are you open

to a reconsideration of this policy for this subset of drugs?

Answer: Part D regulations at 42 CFR 423.154 require 14-day-or-less dispensing cycles in the

LTC setting for oral solid brand name drugs. In order to simplify administration of these

requirements for Part D sponsors, CMS adopted in regulation the same definition of brand name

drugs and generic drugs at 42 CFR 423.4 that sponsors are required to use when administering

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other program requirements, including the statutory Low Income Subsidy copayments. We

recognize the distinction between brand name drugs approved as NDAs and generics that were

approved before the creation of the ANDA process. However, any such reconsideration of the

regulatory definition of brand name drugs and generics would require notice and comment

rulemaking.

Question 36

Regarding Physician Quality Reporting Feedback: The success of quality initiatives to

influence physician behavior depends largely on the timeliness of the feedback they receive

from CMS. Yet the data from Physician Quality Reporting System isn’t made available to

physicians for nearly two years after the fact. What is CMS’ plan to address the data lag

that currently exists from CMS to physicians? Has CMS determined an appropriate

timeline for feedback that provides for an equitable determination of physician’s quality

performance? When will CMS provide public comment on a plan to disseminate quality

information?

Answer: Section 609(b) of the American Taxpayer Relief Act of 2012 requires the Secretary to

develop a strategy to provide providers with data on quality performance and utilization in a

timely manner. The provision requires the Secretary to take into account specified items such as

risk adjustment methods and the frequency of providing data so that the data is effective in

improving provider performance. The provision also requires the Secretary to develop an

interim strategy not later than one year after the date of enactment of the American Taxpayer

Relief Act of 2012. Pursuant to Section 609(b), the strategy must take into account feedback

from providers and must be updated not later than 18 months after the date of enactment. We

will address these questions as we develop the interim and updated strategy as required by the

law. In addition, the Administration has proposed in our FY 2014 Budget to allow for greater

dissemination of medical claims data directly to physicians through entities participating in the

Medicare Data Sharing for Performance Improvement program.

Question 37

Regarding Worker Compensation Set-Asides: During the confirmation of William Schultz,

the department’s General Counsel, in response to a question about well-document

problems with the CMS review of Worker Compensation Medical Set-aside Accounts

(WCMSA), he indicated your agency is taking steps to become more transparent, is

considering the adoption of an appeals process in order to ensure fairness and consistency,

and is reviewing whether the use of evidence-based guidelines should be expanded.

Unfortunately, since his answers were submitted, the agency released some documents that

have been used to assess WDMSA submissions. The issue remains unaddressed. Instead,

according to some observers, it only highlights the inconsistency and deficiency of the

review process for WCMSAs, which continues to put the Medicare Trust fund and the

interests of beneficiaries at risk. What additional steps will CMS take to ensure that 1) the

review program is operated in a transparent and consistent fashion; 2) utilizes scientific,

evidenced-based guidelines when reviewing submissions; and 3) establishes an appeals

process in order to, as Mr. Schultz suggested, “ensure fairness and consistency”?

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Answer: On June 15, 2012, we published an Advance Notice of Proposed Rulemaking (ANPRM) to

solicit public input on options that could be used to address future medical expenses related to an

accident or injury for which there is third party liability, including in workers’ compensation

cases. We received over 100 comments. As noted in our ANPRM, we anticipate promulgating

rules on these issues in the near future, consistent with the SMART Act that was enacted in

January.

We are always striving to improve the MSP program so that we operate in a transparent and

consistent manner. In the past, we have heard from stakeholders that we should offer additional

information about the operation of the MSP program, and we are working hard to provide

guidance to help educate stakeholders about the operation of the MSP program. While the

informal guidance we recently released does not yet address all of the concerns we have received

regarding WCMSAs, it does list the criteria we will consider in making decisions about a

particular WCMSA as well as the procedure for receiving and reviewing WCMSAs. We are

considering the feedback received on the program as we consider potential improvements.

Question 38

Regarding Diagnostic Laboratory Payment Reform: The President’s Budget has proposed

additional cuts to the clinical lab fee schedule. Last year, CMS initiated re-pricing for

several molecular diagnostics. Due to the antiquated nature of the fee schedule and the

increased development of newer advanced diagnostics, the existing coverage and

reimbursement platform used by CMS is in need of reform. What is CMS doing to

modernize coverage and payment policies to appropriately reimburse for quality tests and

create a stable foundation for encouraging the development of new technologies that

improve quality and reduce costs? What new legislative authority or legislative guidelines

does CMS need to achieve necessary reforms?

Answer: We agree that the current statutory procedures and formulas governing clinical

laboratory payment fail to provide the flexibility needed to modernize payment to reflect changes

in laboratory practice, pricing, and technology. Toward that end, the President’s FY 2014 budget

includes a legislative proposal to provide the Secretary the authority to adjust payment rates

under the Clinical Laboratory Fee Schedule in a budget-neutral manner, beginning in CY 2014.

We welcome ideas on how we can improve our clinical laboratory payment system.

Question 39

Regarding Part B Drug Reimbursement: The reduction of reimbursement for physician-

administered drugs that will occur due to sequestration has led to articles highlighting the

cost of cancer drugs and the impact on community oncology practices. Market participants

have suggested that many patients have been redirected from the clinic to the more

expensive hospital outpatient setting. Does CMS have data available that will confirm that

this transfer of patient care is occurring? If not, what is CMS prepared to do to make this

data available to Congress?

Answer: We share your concern about the potential adverse impacts of the payment cuts

mandated by sequestration, both with regard to Medicare payments, and more broadly across all

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government programs. That is why the Administration has indicated that we stand ready to work

with Congress on balanced approaches to replace sequestration to avoid its adverse impacts.

CMS is committed to preserving Medicare beneficiaries’ access to quality health care. We will

continue to monitor the impact of provider payment cuts mandated under the Budget Control Act

to assess their impact on Medicare beneficiaries and we are happy to share our results.

Question 40

Regarding CMS Coverage of Alzheimer’s Diagnostics: An FDA-approved new diagnostic

for helping detect if a patient has Alzheimer’s is being considered by CMS for national

coverage under Medicare (NCD). The Alzheimer’s association and thought leaders in that

community have endorsed the technology and have urged CMS to institute coverage

without coverage with evidence development. The Alzheimer association and clinical

community have adopted appropriate use criteria for the diagnostic to assure appropriate

utilization. However, CMS has also discussed the potential additional use of coverage with

evidence development (CED) for this diagnostic test. Can you provide an update on this

NCD? Why is the appropriate use criterion developed by the medical community

insufficient to protect from over utilization of this diagnostic? What will CMS do to ensure

this diagnostic is available to the Medicare patients in need?

Answer: CMS is actively engaged in reviewing new technology to ensure timely access to

innovation for our beneficiaries. In October 2012, we opened a National Coverage Analysis (the

first step in the National Coverage Determination (NCD) process) to reconsider a prior NCD on

the use of Positron Emission Tomography (PET) scans, which provided national coverage of

PET using only specified radioisotopes for certain indications, and conditional coverage for

additional uses under the process known as Coverage with Evidence Development (CED).

Reconsideration of this NCD was requested by a stakeholder who advocated coverage of PET

using a new type of radiopharmaceutical approved by the FDA in 2012 to image beta-amyloid

plaques in certain patients being evaluated for Alzheimer’s disease and other causes of cognitive

decline. To help inform this evidence review, we convened a meeting of the Medicare Evidence

Development and Coverage Advisory Committee (MEDCAC) in January 2013. A proposed

coverage decision is expected by July 2013, with a final decision (including consideration of

public comments) expected by October 2013.

Question 41

Regarding State Authority to define qualified providers: Section 1902(a)(23) of the Social

Security Act states that Medicaid providers must be “qualified to perform the service or

services required,” and the federal regulations implementing this statute (42 CFR Section

431.51) allow states to set “reasonable standards relating to the qualifications of

providers.” Additionally, Section 1902(p)(1) infers that states have broad authority to

exclude certain providers, and the legislative history from Senate Report 100-109 states

“This provision is not intended to preclude a State from establishing, under State law, any

other bases for excluding individuals or entities from its Medicaid program.” A First

Circuit court ruling in First Medical Health Plan, Inc. vs. Vega-Ramos found that Section

1902(p)(1) “permit[s] a state to exclude an entity from its Medicaid program for any reason

establish by state law.” Do you agree with the premise of this court’s ruling that states

have broad authority to exclude certain provider entities from its program? If not, how do

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you interpret “reasonable standards relating to the qualifications of providers” that may be

set by a state to set in order to exclude certain providers from its Medicaid program?

What are the limits on this state authority?

Answer: Our regulations codified at 42 CFR 431.51 provide that beneficiaries may obtain

services from any qualified Medicaid provider that undertakes to provide services to them,

pursuant to section 1902(a)(23) of the Act. 42 CFR 431.51(a)(6) codifies section 1932(a) of the

Act, which permits a state to restrict the freedom of choice required by section 1902(a)(23) of the

Act under specified circumstances related to enrollment in managed care, for all services except

family planning services. States are required to comply with the freedom of choice requirements

as dictated by statute and codified in regulation. We do not believe that it is consistent with

Section 1902(a)(23) for states to exclude providers for reasons unrelated to their ability to furnish

the services at issue, or bill for the services properly and ensure program integrity. In context,

section 1902(p)(1) of the Act permits states to have independent authority to protect program

integrity, similar to the authority the Secretary exercises under sections 1128, 1128A or

1866(b)(2) of the Act. In the case you reference, we note that Puerto Rico is explicitly exempted

from the freedom of choice requirement as codified in 42 CFR 431.51(b)(1).

Question 42

Regarding Per Capita Caps: As you know, Medicaid consumes the largest health-related

share of federal revenues and federal spending as a share of the economy is set to grow by

25 percent over the next 10 years. Clearly, Medicaid – like our other entitlement programs

– must be reformed if we are to make a meaningful impact on our debt and deficit

problems. President Clinton proposed Medicaid per capita caps back in the 1990s, and to

quote the former Secretary of Health and Human Service when she testified in this

Committee back in March of 1997, per capita caps mean “there are absolutely no

incentives for States to deny coverage to a needy individual, or to a family…It is a sensible

way to make sure that people who need Medicaid are able to receive it.” Given the need to

address health care entitlement spending and the bipartisan history behind Medicaid per

capita caps, would you work with us on developing the details of this proposal to ensure we

enact reforms that both protect taxpayers and patients?

Answer: CMS strives to ensure that the current Medicaid program is run as efficiently as

possible while ensuring that our beneficiaries have access to services delivered through a high-

quality health care delivery system. We view the Medicaid program as a partnership between

CMS and the states and strive to use statutory and regulatory flexibility and the ingenuity of the

states to regularly make improvements to the program. We have effectively managed Medicaid

spending growth. The latest Medicaid Actuarial Report shows that Medicaid benefits spending

per beneficiary is estimated to have decreased by 1.9% from 2011 to 2012. The Affordable Care

Act has provided both CMS and the states with opportunities to enhance the quality of care

delivered to Medicaid beneficiaries in a more efficient and coordinated manner. We are

transforming our data systems so we have better and more accurate information about

expenditures, we are moving beneficiaries from traditionally expensive long-term care settings to

home and community based services, we are exploring new delivery system models like

integrated care to replace more expensive delivery systems, and we are implementing incentives

for states to comprehensively address the needs of their most chronically ill and expensive

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beneficiaries. The President’s budget proposes additional ideas to improve Medicaid efficiency

without shifting costs to states or beneficiaries.

Question 43

Regarding Medicaid Premium Assistance: CMS recently released “Frequently Asked

Questions” regarding Medicaid premium assistance proposals. I understand that you

intend to approve some of these proposals under Section 1115 waiver authority. Do you

believe that 1115 waiver authority gives the Secretary of Health and Human Services the

ability to waive the “wrap-around” benefit requirements, if benefits offered under qualified

health plans differ from those traditionally offered in Medicaid?

Answer: As described in the Frequently Asked Questions (FAQs) released by CMS regarding

the use of premium assistance, we will only consider demonstration proposals that make

arrangements with qualified health plans (QHPs) to provide any necessary wrap around benefits

and cost sharing.

Questions from Senator Rockefeller

Question 1

On April 2, 2013, Governor Beebe announced that Arkansas received written approval

from Secretary Sebelius for the state’s Medicaid expansion “concept,” which would use

Medicaid funding to enroll beneficiaries into private coverage. However, many important

details still must be sorted out in a more comprehensive demonstration proposal. Does

CMS plan to use this process—first approving a concept memo and then approving a more

detailed demonstration proposal—for all states interested in using the premium assistance

model? What outstanding issues is Arkansas expected to address in the demonstration

proposal before they can move forward with implementation?

Answer: As a regular course of business, CMS provides technical assistance and informal

guidance to states as they develop proposals at the state level. States often request this assistance

from CMS prior to making a formal proposal, in order to better understand applicable statutes

and regulations and the impacts of those provisions on their proposals. CMS recently issued a

set of Frequently Asked Questions (FAQs) regarding the use of premium assistance, providing

more information to all states considering such an option. We would expect states that are

interested in this option to use these FAQs as a guide when developing their proposals. Arkansas

has yet to make a formal submission to CMS and without such a proposal it is premature to

speculate on the items that may require additional information from CMS.

Question 2

How will HHS address the additional costs generated by enrolling Medicaid beneficiaries

into private coverage in Arkansas and other states that are interested in using the premium

assistance model for Medicaid expansion? How much of those additional costs be assumed

by the federal government versus the states?

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Answer: CMS recently released a set of Frequently Asked Questions (FAQs) that provide

additional information to states interested in pursuing the use of premium assistance.

Specifically, the FAQs described that the current Medicaid statute requires that premium

assistance arrangements be “cost effective.” “Cost effective” generally means that Medicaid’s

premium payment to private plans (plus the cost of additional services and required cost sharing

assistance) will be comparable to what Medicaid would otherwise pay for the same services.

Such a standard would need to be met if a state pursued the use of premium assistance through

their State Plan.

Additionally, some states have expressed interest in section 1115 demonstrations to provide

premium assistance. CMS has indicated that we will consider approving a limited number of

premium assistance demonstrations and that as part of such demonstration would consider states’

ideas on cost effectiveness that include new factors introduced by the creation of Health

Insurance Marketplaces and the expansion of Medicaid. As with all demonstration proposals,

the actuarial, economic and budget justification (including budget neutrality) would need to be

reviewed and, if approved, the program and budgetary impact would need to be carefully

monitored and evaluated.

Question 3

There seems to be a trend toward Medicaid managed care organizations both in the

Medicaid expansions and in the duals demonstration projects. I continue to hear

complaints from beneficiaries about transitions to managed care. Assurances of continuity

of care are not being met, and the result can be patient care ending mid-treatment, with

negative health consequences. What steps is HHS taking to monitor quality, plan

performance and patient experience under these new Medicaid models? Will beneficiaries

in these states have real options to opt-out of private coverage into traditional Medicaid?

Answer: Ensuring quality of care for our beneficiaries is CMS’ top priority. Managed care is

not new for Medicaid; most states contract with private managed care organizations to deliver

services to their beneficiaries. More recently, states have expanded managed care to new

populations and to new services, including long term care services and supports. States have the

flexibility under the statute to adopt managed care without a waiver, but some have pursued the

use of managed care to deliver benefits through 1115 demonstrations. CMS has worked with

states to ensure the appropriate use of this delivery system, to promote quality and improve

health outcomes. In approving demonstrations, CMS has exempted certain populations and

ensured the readiness of the new delivery system prior to allowing enrollment in managed care.

Additionally, demonstrations include ongoing monitoring plans to assure contract compliance,

network and benefit adequacy and the quality of care provided and, particularly with respect to

long term services and supports, we have worked with states to create or expand ombudsman

offices to help beneficiaries with transition. In cases where the use of managed care has been

approved through an 1115 demonstration, CMS and the state have agreed to a specific set of

special terms and conditions whereby the state agrees to monitor and report on demonstration

requirements.

Question 4

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I was pleased to see that the memorandums of understanding on duals demonstrations

include some requirements for consumer engagement. However, I am concerned about

whether and how that engagement will actually take place in the states. Can you speak to

the importance of consumer engagement in the duals demonstration projects and how HHS

will make sure that the M.O.U. provisions to safeguard consumers are satisfied on the

ground?

Answer: As you know we’ve worked with each state to incorporate the most robust beneficiary

protections from Medicare and Medicaid and will integrate and enhance the current protections

to create a more accessible, seamless system of care for Medicare-Medicaid enrollees.

Continuity of care provisions will ensure beneficiaries have access to their existing doctors and

other providers for a specified period of time while they transition into demonstration plans, and

Demonstration enrollees will retain all Medicare Part D beneficiary protections.

In addition, beneficiaries will receive clear, understandable notices that have been reviewed by

advocacy organizations and field tested with beneficiaries. Outreach and education will proceed

through multiple channels at multiple points in time and will take into account the prevalence of

cognitive impairments and mental illness in this population as well as the incidence of limited

English proficiency. Independent resources, such as choice counselors and enrollment brokers,

will assist beneficiaries in making enrollment choices. We will also leverage existing resources,

such as State Health Insurance Programs and Aging and Disability Resource Centers, to provide

one-on-one counseling on enrollment options. We will provide specialized training for 1-800-

Medicare operators to enable them to effectively assist beneficiaries.

CMS will be working with each state to ensure that they comply with the terms of the

Memorandums of Understanding, other related Demonstration agreements and all applicable

laws and regulations. CMS is funding and managing the evaluation of each approved

Demonstration. CMS has contracted with an external independent evaluator to measure,

monitor, and evaluate the overall impact of the Demonstrations, including impacts on Medicare-

Medicaid enrollees, expenditures, and service utilization. The evaluator will design unique,

state-specific evaluation plans for each individual state participating in the Demonstration, as

well as an aggregate analysis that will look at the Demonstration overall including

Demonstration interventions and impact on key subpopulations within each state. The

evaluation will use a mixed methods approach to capture and analyze quantitative and qualitative

information.

The Memoranda of Understanding for Massachusetts, Ohio, Washington, Illinois, and California

provide examples of the types of areas that will be measured in all Demonstrations, including

beneficiary experience with care and care transitions, the support afforded by community living,

beneficiaries’ access to services, and shifts in service utilization patterns. Additional quality

measures, as well as qualitative evaluation components such as beneficiary focus groups and key

informant interviews, will be included in the state-specific evaluation plans. CMS will apply

Medicare Part D requirements regarding oversight, monitoring, and program integrity to

Demonstration plans.

Question 5

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I strongly believe that Independent Payment Advisory Board will allow necessary, cost-

saving changes to Medicare without harming beneficiaries. The Board would need to start

its work this year and yet there have been no nominations yet. Where does this stand and

what can you do to move it forward?

Answer: We agree that the Independent Payment Advisory Board (IPAB) will help to ensure

that Medicare continues on a sustainable financial footing. The President looks forward to

working with Congress to begin the nomination process for IPAB Board members in the near

future. We are encouraged to see that our recent efforts to improve quality and efficiency in

Medicare are contributing to historically low cost growth in the program. Under current

assumptions, projected per capita Medicare spending will not exceed the statutory target for

several years.

Question 6

As the marketplaces become up and running, it is important to make sure that children

maintain access to the most affordable and comprehensive coverage. Can you discuss how

CMS plans to navigate the intersection between the Medicaid and CHIP programs with

marketplace coverage, while placing a priority on making sure that children are provided

with the most comprehensive and affordable care?

Answer: CMS is fully committed to helping providing high quality, affordable coverage to all

children, including those with private insurance and in the Medicaid and CHIP programs. We are

also fully aware that some families may receive coverage from different sources, for instance, a

child may be enrolled in CHIP, while the parents purchase private insurance on the Marketplace.

Whenever possible, we try to align the essential health benefits required for Marketplace plans

with the comprehensive coverage received by Medicaid beneficiaries.

CMS’ final eligibility rules for both Marketplaces, Medicaid and CHIP outline standards for

mutual agreements including the clear delineation of the respective responsibilities of programs

in support of a coordinated and streamlined eligibility and enrollment process. There are

additional agreements needed to exchange data among insurance affordability programs, and

between states and the federal government in support of verifications. Development and

finalization of those agreements is proceeding concurrently with operational and technical

modeling and testing.

Question 7

According to pharmacy benefit manager Prime Therapeutics and Blue Cross and Blue

Shield of Minnesota, specialty drugs will likely account for 50% of all drug costs by 2018,

up from 28.7% of total prescription drug costs in 2012. In many cases these drugs account

for more than half of the treatment costs for an illness (no opportunity for medical offset).

Medicare will see these costs largely under Part B. How specifically is the agency

responding to this financial threat?

Answer: CMS agrees that prescription drugs play a large role in Medicare spending as well as a

person’s interaction with the health care system.

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Improved medication adherence through policies like ACOs can help reduce other health care

costs and improve quality.

In addition, the recently released President’s budget proposal for fiscal year 2014 includes

proposals for reducing overpayments for drugs paid under Parts B and D. The Part D proposal

would require manufacturers to pay the difference between rebates they negotiate with Part D

plans and Medicaid rebate levels, beginning in 2014. This proposal would allow Medicare to

benefit from the same rebates that Medicaid receives for brand name and generic drugs provided

to beneficiaries who receive the Part D Low-Income Subsidy, beginning in 2014. The proposal

would require manufacturers to pay the difference between rebate levels they already provide

Part D plans and the Medicaid rebate levels. The Part B proposal would reduce payments of Part

B drugs from the current methodology of average sales price (ASP) plus 6 percent to ASP plus 3

percent. In order to preserve access to care, manufacturers would be required to provide a

specified rebate in certain instances as determined by the Secretary.

Questions from Senator Menendez

Question 1

Regarding Imputed Rural Floor - As you’re aware, New Jersey and Rhode Island are

unique among the states because they’re considered “all urban” for Medicare wage

indexing purposes. This means that hospitals in my state are ineligible for the myriad

special payments available to hospitals located in rural areas or which have been specially

classified as being in rural areas. As an attempt to provide some equity in the system, CMS

devised the imputed rural floor. This policy serves the same purpose as the regular rural

floor available to every other state and provides New Jersey hospitals with a more

equitable payment structure that reflects the unique health care market in the state. The

imputed rural floor is set to lapse at the end of the current fiscal year, but can be extended

as part of the 2014 Inpatient Prospective Payment System (IPPS) rule.

New Jersey hospitals are struggling to recover from Superstorm Sandy, facing significant

payment reductions from sequestration, and working tirelessly to implement significant

delivery system reforms. It would be devastating to New Jersey’s health care

infrastructure for CMS to cherry-pick the imputed floor out of the entire Medicare wage

index system for expiration, especially while the rest of the system is allowed to remain as

is. Earlier this year I sent a letter, signed by the entire New Jersey delegation, urging the

extension of this vital policy.

If confirmed, can you assure me that the imputed rural floor will continue until such time

as Congress acts on a comprehensive overhaul of the wage index system?

Answer: In FY 2005, CMS adopted the “imputed” floor as a temporary 3-year regulatory

measure to address a concern that hospitals in all-urban states were disadvantaged by the absence

of rural hospitals to set a wage index floor in those states. The imputed floor was originally set

to expire in FY 2007 but was extended for an additional year in FY 2008. In FY 2009, CMS

extended the imputed floor for an additional 3 years through FY 2011. In FY 2012, CMS

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extended the imputed floor again through FY 2013. We will issue the FY 2014 IPPS proposed

rule in short order, along with our decision on whether to propose extending the imputed floor.

Question 2

Regarding Essential Health Benefits and Behavioral Health Services - In following up to

my question during the hearing, I wanted to provide you with some additional information

about the concerns I have regarding the essential health benefits (EHB) rule and the

statutory requirement that qualified health plans (QHPs) offer behavioral health services,

such as those used to treat autism spectrum disorders.

The underlying reason I fought to have “behavioral health” explicitly codified in the EHB

was because of the countless instances of people being denied access to needed behavioral

health services because these services weren’t deemed as being “medical” or “mental

health” services covered under their insurance policy. The final EHB rule issued on

February 25, 2013 does not adequately protect against this practice nor provide assurances

that everyone enrolled in a QHP will have access to behavioral health services, as

prescribed in law.

The primary area of concern is that the rule allows plans to substitute benefits. While the

rule ensures that substitution is only allowed within each benefit category, and that it be

actuarially equivalent, there is still a strong likelihood that substitution could lead to

limitations on the availability of behavioral health services. Because this benefit category

also includes mental health and substance use disorder services, there are concerns plans

could simply increase the availability of mental health or substance abuse services and

decrease or essentially eliminate, in an actuarially equivalent manner, the availability of

behavioral health services. This has the practical effect of continuing to allow issuers to

deny access to these important services.

Additionally, in a paragraph of the rule that explains the requirements needed to satisfy

this benefit category the rule states that services “must be provided in a manner that

complies with the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).”

(78 FR 12843) However, a 2012 Report to Congress on the implementation of MHPAEA

states that, when it comes to behavioral health services, the “impact and protections” of

MHPAEA are being interpreted and implemented as part of ACA. This circular logic

provides no real assurances that behavioral health services are being meaningfully

addressed in either case.

In another section discussing the impact on issuers, the final rule reiterates that the statute

requires “that all plans covering EHB offer mental health and substance use disorder

service benefits, including behavioral health treatment and services.” (78 FR 12861)

However, the rule fails to elaborate further on the behavioral health aspect, only focusing

on mental health parity. This again fails to address how issuers are to ensure access to

these services in a meaningful way.

Finally, when asked about the lack of assurances regarding behavioral health services CMS

and CCIIO stated that any shortcoming in coverage under the mental health and substance

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abuse category will be made up in the rehabilitative and habilitative services benefit

category. However, the rule itself clearly recognizes habilitative benefits “are not well

defined.” (78 FR 12844) The lack of an established definition of habilitative service

provides no assurances that behavioral health services will be included in any future

definition, especially since issuers will (rightly) claim they belong in the mental health and

substance use disorders category. The rule continues by saying states will “have the first

opportunity to determine which habilitative benefits must be covered… [and] if states have

not chosen to define habilitative benefits, the issuer’s choice remains.” This is

understandably causing concern because states that do not yet have a definition of

habilitative services are likely to be those that also lack a requirement for behavioral health

services, meaning issuers in those states are likely to lack both.

Please address the concerns outlined above, including the lack of consistency within the

EHB and MHPAEA rules; how substitution of benefits does not equal discrimination or

access limitation; and how the definition of habilitative services could come to include

behavioral health services.

What specific policies and procedures are in place to ensure behavioral health services,

including those for autism spectrum disorders, are included in every QHP offered in every

state, as required by statute? Additionally, what are the specific policies to ensure this is

the case in states with a federally-facilitated exchange and/or no existing state-based

behavioral health requirements?

Will CMS overrule the certification of a plan as a QHP if it substitutes benefits that

diminishes coverage of, or limits access to, behavioral health services, even if it’s done

within the same benefit category and in an actuarially equivalent manner?

Answer: Throughout the implementation of the essential health benefits (EHB), we have taken

great care to ensure that the law is implemented consistently. The statute contains many

provisions that affect how EHB and MHPAEA interact. Section 2707 of the PHS Act requires

health insurance issuers offering non-grandfathered coverage in the individual and small group

health insurance markets to cover the EHB package required under section 1302 of the

Affordable Care Act. The Affordable Care Act grants the Secretary authority to define EHB.

The EHB final rule stated that plans are required to comply with the parity standards set forth in

45 CFR 146.136 – the MHPAEA regulations - in order to satisfy the requirement to provide

EHB. Section 1311(j) of the Affordable Care Act specifies that section 2726 of the PHS Act –

the portion of the statute that contains the MHPAEA amendments to the Public Health Service

Act - shall apply to qualified health plans in the same manner and to the same extent as such

section applies to health insurance issuers and group health plans. For these reasons, HHS has

concluded that plans must comply with the parity standards applicable to mental health and

substance use disorder benefits set forth in 45 CFR 146.136 in both the individual and the small

group markets in order to satisfy the requirement to cover EHB.

As you know, the essential health benefits rule permitted states to select a benchmark plan from

among several plans that currently exist in the market. This benchmark plan, known as the EHB

benchmark plan, must include ten categories of items and services identified in the statute.

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Among these categories is mental health and substance use disorder services, including

behavioral health treatment. If a benchmark plan chosen by a state does not contain any benefits

in a benefit category, it must supplement those benefits with the benefits from another

benchmark plan option. The essential health benefits final rule requires that all qualified health

plans provide benefits that are substantially equal to the EHB benchmark plan including both

covered benefits and limitations on coverage including coverage of benefit amount, duration and

scope.

As you note, qualified health plans are permitted to substitute benefits only within categories and

such substitution must be actuarially equivalent. The EHB final rule permits substitution to

provide greater choice to consumers, and promote plan innovation through the use of various

coverage and design options. We note that even if qualified health plans have substituted benefits

those plans would still be subject to the non-discrimination provisions of the Affordable Care

Act including section 1302 , which is codified in 45 CFR 156.125 providing that an issuer does

not provide EHB if its benefit design, or the implementation of its benefit design, discriminates

based on an individual’s age, expected length of life, present or predicted disability, degree of

medical dependency, quality of life, or other health conditions. Finally, under the EHB final

rule, states may, at their option, limit or prohibit benefit substitutions that would otherwise be

permissible under our regulations,

With respect to certification, a state implementing a state-based Marketplace is responsible for

QHP certification. CMS will be responsible for certifying all QHPs in Federally-facilitated and

State Partnership Marketplaces.

Question 3

Regarding Molecular Pathology Tests - As of January 1, 2013 clinical labs have been

utilizing new CPT codes when billing for molecular pathology services. These new codes

were originally going to be used in 2012. However CMS, recognizing the need for more

time to fully implement them, delayed their use until this year.

It has recently come to my attention that there are serious concerns about how CMS and,

more specifically, the regional Medicare administrative contractors (MACs) are

implementing and pricing these new codes. Despite the year reprieve, it appears that the

MACs have yet to set prices for many of these new codes and, for the codes they have

priced, set a rate that is inconsistent with both the historic prices and the tests’ actual costs.

In either case, there has been a serious lack of transparency in how the MACs are

calculating the prices and what, if any, methodology they are using.

The ongoing delay has resulted in clinical labs in New Jersey going without reimbursement

for these tests since the beginning of the year, or being reimbursed at rates upwards of 90

percent below the rates used just last year. I am concerned with how the process of

implementing and pricing these new CPT codes will impact beneficiaries’ ability to receive,

physicians’ ability to order, and labs’ ability to conduct these molecular pathology tests.

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What specific steps is CMS taking to address the ongoing concerns with these new

molecular pathology codes, including providing oversight and guidance to the MACs,

requiring transparency in the pricing methodology, and ensuing a timely and accurate

reimbursement for tests that have already been conducted?

Answer: CMS uses CPT codes developed by the AMA in establishing payment rates for

Medicare services. The AMA CPT Panel developed 114 new single CPT codes to replace

multiple “stacking codes” (based on component steps) that were previously used to bill for

molecular pathology tests. The old “stacking codes” were deleted at the end of 2012 and are no

longer available.

While the new codes were issued in 2012, CMS decided to delay their use for a year in order to

consider whether they should be paid under the physician fee schedule (as pathologists preferred)

or the clinical laboratory fee schedule (as preferred by laboratories). After requesting comments

as part of the 2013 physician fee schedule rule, we decided to keep them on the lab fee schedule,

with an additional payment available for interpretation by a pathologist. New rates for these tests

(generally genetic tests) are being established through the “gap-filling” process, which enables

the Medicare contractors to collect a wide range of relevant data. While this process is

underway, the tests are being paid interim rates set by the contractors, which may reflect invoice

amounts, old “stacking code” prices, or case-by-case determinations by the contractor medical

directors.

The local gap-fill prices will be submitted to CMS this month and will be open to public

comment for 60 days. CMS will post final prices in September, at which point stakeholders may

request reconsideration, with supporting evidence. The 2014 fee schedule, including national

limitation amounts for the new test codes, will be issued in November.

Questions from Senator Toomey

Question 1

I am concerned by reports of physicians closing their oncology practices due to

reimbursement concerns. Is CMS tracking practice closings? Could CMS track National

Provider Identifiers to see if those physicians are moving into a hospital system? As

sequester begins to take effect, could CMS track the mix of Medicare beneficiaries

receiving oncology services in a physician office versus an outpatient department both pre

and post sequester?

Answer: We share your concern about the potential adverse impacts of the payment cuts

mandated by sequestration, both with regard to Medicare payments, and more broadly across all

government programs. That is why the Administration has indicated that we stand ready to work

with Congress on balanced approaches to replace sequestration to avoid its adverse impacts.

CMS is committed to preserving Medicare beneficiaries’ access to quality health care. We will

continue to monitor the impact of provider payment cuts mandated under the Budget Control Act

to assess their impact on Medicare beneficiaries and we are happy to share our results.

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Question 2

PA is one of the most rural states in the country and health systems have been working

towards expanding telemedicine to ensure expanded access to quality health services. How

does CMS plan to expand telemedicine efforts?

Answer: I am very supportive of telehealth initiatives as a means to enhance access to needed

services for Medicare beneficiaries. The Center for Medicare and Medicaid Innovation is testing

several projects related to increased use of telehealth. A project in Hawaii received a Health Care

Innovation Award for telehealth-based home monitoring for very high risk patients with complex

health care needs in order to prevent hospitalizations. A project in Wyoming received a Health

Care Innovation Award to improve care coordination and communication with practitioners in

ten rural Iowa counties using telehealth and web-based personal health records. In addition, the

Affordable Care Act requires accountable care organizations (ACOs) participating in the

Medicare Shared Savings program to coordinate care for beneficiaries, such as through the use of

telehealth, remote patient monitoring, and other such enabling technologies.

Under the fee for service Medicare benefit, although the statute stipulates that Medicare may pay

for telehealth services only in rural health professional shortage areas or counties that are not

metropolitan statistical areas, CMS has the flexibility to determine the types of services that are

paid for. CMS annually evaluates whether to add services to this benefit and last year in the final

rule for the CY 2013 Physician Fee Schedule, a variety of new services were added. Some of

these new services include: alcohol and substance abuse and intervention services; annual

alcohol misuse screening; annual depression screening; intensive behavioral therapy for

cardiovascular disease; and intensive behavioral therapy for obesity.

Question 3

The Medicare wage index is an issue of particular importance to hospitals in parts of

Pennsylvania as well as in other states. CMS has acknowledged that the Medicare wage

index system needs to be fixed. How do you view this issue? How would you suggest

addressing this issue and what would be your timeframe?

Answer: Under the current hospital wage index system, hospitals are classified into

geographically similar labor market areas. However, because some hospitals view their wage

index as not accurately reflecting the labor costs they incur for hospital staff, a number of acute

care hospitals seek to “reclassify” into other labor areas.

In April of 2012, CMS submitted a Report to Congress entitled, “Plan to Reform the Medicare

Wage Index.” In that report, we discussed a different approach to calculating the wage index

that we believe would more accurately reflect the labor costs incurred by each hospital based on

the hospital employees’ commuting patterns. This “commuting-based wage index” would allow

for the wage index to be calculated at a more granular level, down to the individual hospital. It

could also potentially obviate the need for hospital reclassifications to other labor market areas.

In the report, we indicated that more data on hospital employee commuting patterns may be

necessary before adopting a commuting-based wage index. Additionally, we stated that certain

special adjustments to the wage index under current law may no longer be applicable and should

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be reviewed in order to determine if they would still be relevant under the new system. Current

law is prescriptive with respect to the wage index; nonetheless, we continue to evaluate whether

improvements could be made under existing authority.

Questions from Senator Nelson

Question 1

Regarding Medicaid expansion: There has been a lot of talk not only in my state but other

states considering what is now being referred to as the “Arkansas model” for expanding

their Medicaid programs through some variation of premium assistance to private

insurers.

It’s my understanding that just because a beneficiary receives premium assistance, he or

she does not lose the protections of the Medicaid program—they are still considered a

Medicaid beneficiary and they still have retain Medicaid’s benefits, protections, and cost-

sharing restrictions. Can you discuss CMS’s guidance to states on what their

responsibilities are to Medicaid beneficiaries if the insurance plan does not have these

protections? How can we be sure that if states are allowed to experiment they will

adequately provide for their beneficiaries? How will CMS actively monitor these newer

models to be sure that they are working as intended?

Answer: CMS has recently released a set of Frequently Asked Questions (FAQs) regarding

state interest in the use of premium assistance. Under all premium assistance arrangements,

beneficiaries remain Medicaid beneficiaries and continue to be entitled to all benefits and cost-

sharing protections. States must have mechanisms in place to “wrap-around” private coverage to

the extent that benefits are less and cost sharing requirements are greater than those in Medicaid.

Some states have expressed interest in section 1115 demonstrations to provide premium

assistance. CMS has indicated that we will consider approving a limited number of premium

assistance demonstrations and that as part of such demonstration would consider states’ ideas on

cost effectiveness that include new factors introduced by the creation of Health Insurance

Marketplaces and the expansion of Medicaid. CMS has described the type of proposals that it

will consider including only those proposals that provide beneficiaries with a choice of at least

two qualified health plans, that make arrangements to provide any necessary wrap around

benefits and cost sharing, that are limited to individuals whose benefits are closely aligned with

the benefits available on the Marketplace and that end no later than December 31, 2016. As is

our practice, CMS will include in any demonstration approval, requirements for the state to

closely monitor and report on the demonstration’s progress and has time limited the

demonstrations to ensure these demonstrations will inform policy for the State Innovation

Waivers that start in 2017.

Question 2

Regarding Price Transparency: Stephen Brill’s TIME magazine article, “The Bitter Pill,”

generated a fair level of conversation about the transparency of prices charged by hospitals

for various procedures. However, the article did not mention the huge step forward the

Affordable Care Act took in this direction. The provision of the ACA that establishes the

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Medical Loss Ratio requirements for health insurers also includes an often-forgotten

provision that requires hospitals to establish and make public a list of standard charges for

items and services, including diagnosis-related groups. What work has been done to

implement this provision?

CMS has also run the “Hospital Compare” website for several years now, which allows

Medicare beneficiaries to compare the quality of hospitals in their area. Do you have any

recommendations to improve “Hospital Compare” to incorporate hospital pricing

information so that beneficiaries can search hospitals based on the overall value of services

provided?

Answer: We believe that Hospital Compare is an extremely important tool in enhancing quality

of care. Not only does it give patients the ability to evaluate the care that hospitals furnish, it

give hospitals a direct and clear incentive to seek to improve the quality of care that they

provide.

Hospital Compare is now a rich source of data and includes the following measures: mortality

rates; readmission rates; clinical process of care measures for heart failure, pneumonia, and acute

myocardial infarction; surgical care measures; complications measures; and very importantly,

survey measure data from our HCAHPS (Hospital Consumer Assessment of Healthcare

Providers and Systems) survey.

We have recently added measures of healthcare associated infections (HAI) to Hospital

Compare, including measures of: Central Line Associated Bloodstream Infections (CLABSI),

Catheter Associated Urinary Tract Infections (CAUTI), and Surgical Site infections from colon

surgery and abdominal hysterectomy. In the next few years, we plan to add the additional HAI

measures of MRSA and C-difficile, which are two measures that have recently been added to the

hospital Inpatient Quality Reporting program. As the science of quality measurement rapidly

evolves and more measures are added to the Hospital Inpatient Quality Reporting program, the

data in the Hospital Compare website will become richer as well.

Additionally, Hospital Compare includes information on Medicare payments to hospitals. We are

exploring ways to make more information on hospital pricing publicly available in a manner that

is consumer-friendly and helpful to individuals who are making decisions about where to seek

care. We welcome your ideas on how we can make our health care system more transparent to

consumers.

We will consider your suggestion to incorporate hospital pricing information in Hospital

Compare, as we work to continually improve this important tool.

Question 3

Regarding Medicare Fraud in the Mental Health Benefit: Recently, the HHS Office of the

Inspector General has highlighted skyrocketing fraud in the mental health benefit in

Medicare. A number of the OIG’s fraud recovery activities in the Medicare mental health

benefit have focused on providers that are no longer licensed or have had their licenses

revoked, but still bill Medicare for millions of dollars each year. My Committee has

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undertaken a broader investigation into the types of fraud perpetrated, but I am very

concerned already that beneficiaries in need of mental health services do not receive value

for the taxpayer dollar.

How does Medicare prevent fraud in mental health service billing? Are there additional

challenges with fraud prevention and recovery activities in the mental health benefit as

compared to other types of fraud? I know that Medicare requires these community mental

health providers to follow state licensing rules- but how does the agency enforce this

requirement and, in your opinion, is it adequate? What communication does CMS have

with state licensure boards to ensure that the mental health provider billing Medicare for

services is still licensed currently in their state?

Answer: As a result of the new authorities and resources provided by the Affordable Care Act

and the Small Business Jobs Act of 2010, CMS has new powerful anti-fraud tools to shift the

agency beyond a “pay and chase” approach to preventing fraud before it happens. As part of our

enhanced program integrity efforts, CMS has implemented a risk-based screening process for

newly enrolling and revalidating Medicare providers and suppliers. This screening process

requires certain categories of providers and suppliers that have historically posed a higher risk of

fraud to undergo greater scrutiny prior to their enrollment or revalidation in Medicare.

Community Mental Health Centers (CMHCs) are in the moderate risk category and are subject to

unannounced site visits along with licensure verifications. All providers and suppliers are

required to meet applicable state licensure and certification requirements in order to enroll or

participate in the Medicare program.

In 2012, CMS began the implementation of the Automated Provider Screening System (APS).

The APS is designed to verify the data submitted on enrollment applications against independent

commercial and health care data, including licensure and certification checks, to establish

eligibility for enrollment or revalidation in the Medicare program. Since March 2011, CMS

validated or revalidated enrollment information for nearly 410,000 Medicare providers and

suppliers under the enhanced screening requirements of the Affordable Care Act. Because of

revalidation and other proactive initiatives, CMS has deactivated 136,682 enrollments and

revoked 12,447 enrollments.

CMS is also using cutting-edge fraud prevention tools such as predictive modeling on fee-for-

service claims. Since June 2011, the Fraud Prevention System has screened over a billion claims

for suspicious billing activity, including claims from CMHCs, while using models targeted to the

services provided by CMHCs. CMS is also launching a pilot targeting the highest CMHC fraud

risk states of Florida, Texas, and Louisiana.

Similar efforts have produced promising results in the past. In 2009 and 2010, CMS conducted a

special project, the South Florida High-Risk Provider Enrollment Project, which targeted fraud

among especially susceptible provider types, including CMHCs, in South Florida. As part of the

project, CMS contracted with the Medicare Administrative Contractor (MAC) and Zone Program

Integrity Contractor (ZPIC) in that area to conduct specific actions designed to detect and deter

CMHC fraud in Palm Beach, Broward, and Miami-Dade Counties, Florida (i.e., South Florida).

For example, the MAC conducted site visits to all South Florida CMHCs in its jurisdiction to

46

verify their existence and operations. CMS used the results of these site visits, along with other

information, to create a fraud-risk score for each of these CMHCs. CMHCs with high fraud-risk

scores were subject to ZPIC investigation, which could result in referrals to law enforcement,

payment suspensions, or revocations of billing privileges.

As of May 2011, the South Florida High-Risk Provider Enrollment Project had resulted in

revocations for 239 providers and suspensions for 8. Use of edits also avoided approximately

$156 million in wasteful or fraudulent claims.

Question 4

Regarding Long-Term Care: As Chairman of the Senate Aging Committee, efficient

quality care in the long-term care environment is an area of particular interest for me.

However, I am concerned that most of our efforts have focused on acute care payers thus

far.

As you may know, 31.5 percent of Medicaid’s $400 billion in shared federal and state

spending goes to long-term care for the elderly and the disabled; a full 70 percent of long-

term care payments come from Medicaid dollars. Yet, I noticed that none of the current

Medicaid demonstrations are in this area, despite the fact that Medicaid is the primary

payer of long-term care services. How will CMS do a better job in the future to pilot

quality activities in the long-term care environment?

I am aware that there are actions in some of the states that are doing dual-eligible

demonstrations surrounding long-term care, but what about the states that are not

currently participating in the demonstrations? More broadly, please tell me what CMS’

over-arching strategy has been thus far to ensure that equal attention is paid to reforming

the post-acute care delivery system?

I have also heard anecdotally from providers in my home state of Florida that CMS has not

provided clear guidance to state entities on requirements for Medicaid long-term care

proposals; for instance, one provider did not realize the extent of documentation needed

showing partnership with the state’s Medicaid program. Such confusion delays proactive

ideas from the community related to innovation in the post-acute care space.

What steps can the agency take right now to provide guidance to state and local entities

that may wish to develop demonstration projects in the Medicaid post-acute care space?

Are you soliciting the involvement and perspective of long-term care providers regularly?

How has the agency engaged the long-term care community more broadly?

Answer: We continue working with states, beneficiaries and advocates, providers and other

stakeholders to provide efficient and quality long-term care. We continue to produce resources

and develop technical assistance that will help nursing homes improve care through continuous

attention to quality of care and quality of life. In addition, to provide efficient long-term care in

the most integrated setting, we continue to work with states to provide home and community-

based alternatives to institutional care. The Money Follows the Person Medicaid Demonstration

helps states rebalance their long-term care systems to transition Medicaid beneficiaries from

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institutions to the community. As part of this demonstration, states must establish procedures to

provide quality assurance and improvement of home and community-based services. The

Balancing Incentive Program is a Medicaid grant program that helps states transform their long-

term care systems by reducing cost through improved systems performance and efficiency,

creating tools to assist with care planning and assessment, and improving quality measurement

and oversight. The Innovation Center’s Initiative to Reduce Avoidable Hospitalizations Among

Nursing Home Residents is working to help Medicare and Medicaid beneficiaries avoid

disruptive hospital admissions by placing nurse care managers in nursing facilities. Additionally,

states have the option to create health homes under the Medicaid state plan for individuals with

chronic conditions. Health Homes integrate and coordinate all primary, acute, behavioral health,

and long-term services and supports. As always, we encourage states to develop innovative ways

to provide long-term care services and we will continue to work with states to implement state-

specific Medicaid demonstrations to enhance their long-term care systems.

Question 5

Regarding Care planning/wellness (Alzheimer’s): Just last week, the New England Journal

of Medicine published a study by the RAND Corporation that the cost of Alzheimer’s and

dementia on our health care system was somewhere between $157 and $215 billion, with

Medicare paying a portion of that cost.

Later this month, I will be holding a hearing in the Aging Committee on the first

anniversary of the National Plan to Address Alzheimer’s Disease. One of the issues we will

be examining is the fact that the vast majority of people do not think about or plan for the

long-term care they might need. This is particularly critical for people facing Alzheimer’s

and dementia because far too many people with Alzheimer’s are not diagnosed until their

symptoms have become severe, making it much more difficult and complex for them and

their loved ones to plan for the future.

When confirmed, what will be your role and CMS’s role in implementing the National

Plan? What is CMS doing to link the public with both diagnostic and care planning tools?

What is the agency is doing to ensure timely access and coverage to new technologies for

Alzheimer’s disease as they become available, particularly diagnostic tools that can help

individuals to get the care they need before it’s too late?

What is CMS doing to ensure that seniors know that detection of cognitive impairment as

part of the annual wellness visit?

Answer: CMS agrees that tackling Alzheimer’s disease is a national priority. We are an active

participant in the National Plan to Address Alzheimer’s Disease, established by the Department

of Health and Human Services (HHS) pursuant to the National Alzheimer's Project Act (NAPA)

enacted in January 2011. The National Plan sets forth five goals, including the development of

effective prevention and treatment approaches for Alzheimer's disease and related dementias by

2025. A National Alzheimer’s Project Advisory Council (including a senior CMS

representative) meets quarterly to discuss the efficacy of government programs in this area, and

annually evaluates and updates the National Plan.

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We are also actively engaged in reviewing new technology to ensure timely access to innovation

for our beneficiaries. In October 2012, we opened a National Coverage Analysis (the first step in

the National Coverage Determination (NCD) process) to reconsider a prior NCD on the use of

Positron Emission Tomography (PET) scans, which provided national coverage of PET using

only specified radioisotopes for certain indications, and conditional coverage for additional uses

under the process known as Coverage with Evidence Development (CED). Reconsideration of

this NCD was requested by a stakeholder to consider coverage of PET using a new type of

radiopharmaceutical approved by the FDA in 2012 to image beta-amyloid plaques in certain

patients being evaluated for Alzheimer’s disease and other causes of cognitive decline. To help

inform this evidence review, we convened a meeting of the Medicare Evidence Development and

Coverage Advisory Committee (MEDCAC) in January 2013. A proposed coverage decision is

expected by July 2013, with a final decision (including consideration of public comments)

expected by October 2013.

Finally, as you noted, an assessment of cognitive function is a required element of the new

Annual Wellness Visit benefit established by the Affordable Care Act at no charge to

beneficiaries. While this is still a relatively new benefit (beginning in 2011), over 3 million

people with Original Medicare obtained an Annual Wellness Visit in 2012 (as well as additional

beneficiaries in Medicare Advantage plans). CMS has undertaken a range of initiatives to

educate providers and beneficiaries about the importance of prevention and Medicare coverage

of preventive services including the Annual Wellness Visit.

Question 6

Regarding Medicare Part D: In the recent Medicare Call Letter there is an assertion that

there is significant waste in part D in the mail order space. Can you please provide more

information as to how CMS came to this conclusion?

Answer: The 2014 Call Letter instructs Part D plans sponsors that they should ensure that

Medicare beneficiaries only receive new prescriptions and refills that they have requested, for

coverage year 2014. To meet this objective, Part D sponsors should require their network retail

and mail pharmacies to obtain patient consent to deliver a prescription, new or refill, prior to

each delivery. CMS has received complaints that beneficiaries have had medications delivered

that had been previously discontinued or were otherwise unwanted and unnecessary at the time

of delivery. Once the prescription is delivered, pharmacies are unable to return the medication to

stock and generally do not reverse the claim if the patient does not want the prescription.

Consequently, automatic delivery practices are potentially generating significant waste and

unnecessary additional costs for beneficiaries and the Part D program overall. We believe

unintended waste and costs could be avoided if pharmacies confirmed with the patient that a

refill, or new prescription received directly from the physician, should be delivered. Shipment of

unwanted medications is not only wasteful, but also a source of significant beneficiary

aggravation and a financial imposition that can negatively affect enrollee satisfaction with the

plan. Supporting this idea, we received a number of comments that indicate beneficiaries return

large quantities of unneeded medications to community pharmacies for take-back programs

because they were unable to stop auto-ship refill programs.

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Questions from Senator Casey

Question 1

Much of the work CMS does focuses on older citizens and people with disabilities. But

there are several million children who receive care through CMS run programs. How do

you see your role as Administrator in serving their needs? What innovative initiatives are

you looking to undertake that are children focused?

Answer: Medicaid and the Children’s Health Insurance Program (CHIP) provide health

coverage to more than 43 million children, including half of all low-income children in the

United States. One of CMS’ most important missions is to ensure that these programs continue

to provide high-quality care to children.

We have a number of initiatives and programs that focus on improving the health and healthcare

outcomes for pediatric populations, including the Strong Start for Mothers and Newborns

initiative. The Strong Start initiative is a project at the Center for Medicare and Medicaid

Innovation (Innovation Center) focusing on reducing early elective deliveries and reducing the

rate of preterm births among high-risk women in Medicaid and CHIP. Additionally, we have

released the Initial Core Set of Child Health Care Quality Indicators for Medicaid and CHIP,

established for voluntary use by state Medicaid and CHIP programs, which includes a range of

children’s quality measures encompassing both physical and mental health, including chronic

conditions such as asthma and diabetes. CMS’ Pediatric Quality Measures Program and the

Pediatric Electronic Health Record Format also represent other initiatives the agency is pursing

to help improve the health and care children enrolled in our programs receive. Additionally, the

Innovation Center is testing medical homes for individuals with disabilities and complex health

conditions, high-risk chronically ill children, and individuals with breast, lung, or colorectal

cancer.

As we do in all areas, we continue to look for opportunities to test promising models in the

Medicaid program and understand the importance of delivering better, more efficient care to

Medicaid beneficiaries. We are working closely with our colleagues at the Center for Medicaid

and CHIP services to coordinate our collective efforts to identify new opportunities.

Question 2

CMS does an outstanding job using its Medicare data to support studies on how to improve

health care. However, as we all know Medicare is mostly older citizens while Medicaid

covers one in three children nationally, making it the largest health care program for

children. One of the issues I have heard over the past few years is how challenging the

Medicaid data is due to the tremendous variation from state to state. What is CMS doing

to try to improve the quality and usability of the Medicaid data to support research to

improve children’s health care?

Answer: While preparing for the future, CMS also continues to work on maintaining and

improving the systems currently used to manage programs and monitor the quality of care

provided to children in Medicaid and CHIP. CMS has several strategies focused on these goals.

CMS is working to streamline several current Medicaid and CHIP data-collection and reporting

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efforts through a unified data model. The two primary components of this model are: (1) the

Medicaid and CHIP Program system, which will serve as the single repository for states to

submit key programmatic information and the system of record for all state Medicaid and CHIP

actions; and (2) the Transformed Medicaid Statistical Information System (T-MSIS), which is an

expanded, streamlined MSIS, the claims-based system that serves at the primary data source to

manage Medicaid and CHIP programs.

Other data and quality measurement efforts include the Initial Core Set of Child Health Quality

Indicators for Children in Medicaid and CHIP. The majority of states are now reporting one or

more of these quality measures, which encompass both physical and mental health, including

chronic conditions such as asthma and diabetes. CMS continues to make improvements to the

CHIP Annual Reporting Template System (CARTS), the vehicle states use to report the

children’s quality measures to CMS. These changes aim to both facilitate more accurate and

complete reporting by states, and also reduce potential burdens associated with this reporting.

CMS has also made improvements to the Form CMS-416, the reporting tool used to assess the

effectiveness of Medicaid’s Early and Periodic Screening, Diagnostic and Treatment (EPSDT)

benefit. CMS developed a set of criteria to flag data that raise concerns about the accuracy of the

data submitted on the CMS-416 and has conducted a state-by-state audit of the data and worked

with states where concerns were identified.

CMS expects that efforts to streamline, improve, or develop new information systems will help

ensure that information is more accurate, complete, and uniform, having the potential to

strengthen quality reporting for children, reduce health care costs associated with inefficiencies

in the health care delivery system, and ultimately facilitate better health outcomes for children.

Question 3

One of the most challenging patient-care issues facing CMS is Alzheimer's Disease among

Medicare and Medicaid beneficiaries. Last Congress, we enacted the National Alzheimer's

Project Act (NAPA) and I want to commend the Department for moving quickly to develop

a national plan.

Now we need CMS’ help to allow beneficiaries and their caregivers to better understand,

diagnose and treat Alzheimer's Disease. Can you tell me how your agency will ensure that

the new diagnostic and therapeutic innovations, approved by the FDA, will be available to

the beneficiaries?

Answer: CMS agrees that tackling Alzheimer’s disease is a national priority. We are an active

participant in the National Plan to Address Alzheimer’s Disease, established by the Department

of Health and Human Services (HHS) pursuant to the National Alzheimer's Project Act (NAPA)

enacted in January 2011. The National Plan sets forth five goals, including the development of

effective prevention and treatment approaches for Alzheimer's disease and related dementias by

2025. A National Alzheimer’s Project Advisory Council (including a senior CMS

representative) meets quarterly to discuss the efficacy of government programs in this area, and

annually evaluates and updates the National Plan.

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We are also actively engaged in reviewing new technology to ensure timely access to innovation

for our beneficiaries. In October 2012, we opened a National Coverage Analysis (the first step in

the National Coverage Determination (NCD) process) to reconsider a prior NCD on the use of

Positron Emission Tomography (PET) scans, which provided national coverage of PET using

only specified radioisotopes for certain indications, and conditional coverage for additional uses

under the process known as Coverage with Evidence Development (CED). Reconsideration of

this NCD was requested by a stakeholder to consider coverage of PET using a new type of

radiopharmaceutical approved by the FDA in 2012 to image beta-amyloid plaques in certain

patients being evaluated for Alzheimer’s disease and other causes of cognitive decline. To help

inform this evidence review, we convened a meeting of the Medicare Evidence Development and

Coverage Advisory Committee (MEDCAC) in January 2013. A proposed coverage decision is

expected by July 2013, with a final decision (including consideration of public comments)

expected by October 2013.

Finally, as you noted, an assessment of cognitive function is a required element of the new

Annual Wellness Visit benefit established by the Affordable Care Act at no charge to

beneficiaries. While this is still a relatively new benefit (beginning in 2011), over 3 million

people with Original Medicare obtained an Annual Wellness Visit in 2012 (as well as additional

beneficiaries in Medicare Advantage plans). CMS has undertaken a range of initiatives to

educate providers and beneficiaries about the importance of prevention and Medicare coverage

of preventive services including the Annual Wellness Visit.

Question 4

I have heard concerns from my constituents that some of the documentation requirements

for the coverage of prostheses are causing problems for providers and that some

beneficiaries are getting denied when auditors cite misunderstood documentation. I also

understand that some of these new processes have begun without going through necessary

procedures and some of the auditors do not have thorough guidelines to follow. While we

all support necessary oversight and fraud prevention, can you please let me know what

steps you are taking in conjunction with those processes to ensure beneficiaries are getting

the care they need?

Answer: Medicare beneficiaries are receiving high quality prosthetics and orthotics that help

them live active and healthy lives, and CMS continues to ensure they have access to appropriate

prosthetics and orthotics. In 2011, the HHS Office of the Inspector General (OIG) released a

report that found Medicare claims for lower limb prosthetics had a high improper payment rate.

CMS is working to educate providers and suppliers on Medicare coverage and documentation

requirements for lower limb prosthetics to reduce the improper payment rate. In addition, CMS

is developing a clinical template in consultation with prosthetic and orthotic suppliers to assist

providers in complying with Medicare coverage policies.

Question 5

The Administration has indicated its strong interest in taking action to repeal the SGR.

The President’s budget, for example, would replace the current Medicare physician

payment system by instituting a period of stable payments for providers and then

transitioning into new accountable payment models. What role could the Center for

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Medicare and Medicaid Innovation play in the development of these models and how

would the agency engage providers and payers in the process?

Answer: We are testing a variety of models that improve care quality, coordinate care, and

reduce the total cost of care that may help inform reforms to physician payments.

For example, the Comprehensive Primary Care Initiative is a multi-payer initiative where CMS

pays primary care providers monthly care management fees for comprehensive care management

on top of their regular Medicare Fee-for Service payment. After two years, CMS offers the

providers the chance to share in any savings they generate. Other payers, often including

Medicaid, are also providing enhanced payment for primary care services.

Another model is the accountable care organization (ACO). In addition to the Medicare Shared

Savings Program, we are testing the Pioneer ACO model and the Advance Payment ACO model.

ACOs involve groups of doctors, hospitals, and providers that accept accountability for

providing high quality coordinated care to Medicare beneficiaries. ACOs are eligible for shared

savings and may be subject to losses.

Finally, the Bundled Payments for Care Improvement initiative is comprised of four broadly

defined models of care, which link payments for multiple services beneficiaries receive during an

episode of care. We think episode-based payment has the potential to transform the delivery

system.

Question 6

Both the GAO and MedPAC have looked at the Medicare in-office ancillary services

exception (IOASE), but neither has actually recommended repealing it. Yet, the

President’s budget seeks to exclude certain services from the IOASE. The administration’s

proposal would exclude “radiation therapy, therapy services, and advanced imaging from

the in-office ancillary services exception to the prohibition against physician self-referrals

(Stark law), except in cases where a practice meets certain accountability standards, as

defined by the Secretary” and results in a savings of $6.1 billion over 10 years. I have

several questions about this proposed policy. First, why did the administration decide to

exclude these services from the IOASE? Second, when OMB modeled this proposal, how

did they define “accountability standards?” Third, could you please share the analysis and

the data used to determine the $6.1 billion savings?

Answer: The in-office ancillary services exception was intended to allow physicians to self-

refer quick turnaround services. While there are many appropriate uses for this exception, certain

services, such as advanced imaging and outpatient therapy, are rarely performed on the same day

as the related physician office visit. For example, according to MedPAC’s 2010 annual report,

MRI and CT services were performed on the same day as an office visit less than a quarter of the

time, with only 8.4 percent of MRI scans of the brain being performed on the same day as an

office visit. Additionally, evidence suggests that this exception may have resulted in

overutilization and rapid growth of certain services. In a report released last September, GAO

found that in 2010, providers who self-referred likely made 400,000 more referrals for advanced

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imaging services than they would have if they were not self-referring. GAO found that these

additional referrals cost Medicare about $109 million.

Effective calendar year 2015, the President’s proposal would seek to encourage more appropriate

use of select services by excluding radiation therapy, therapy services, and advanced imaging

from the in-office ancillary services exception the prohibition against physician self-referrals

(Stark law), except in cases where a practice meets certain accountability standards, as defined

by the Secretary.

Questions from Senator Grassley

Question 1

Background: You sent a letter to CMS in 2011 asking about its policies on communicating

with the political intelligence community. CMS replied a month later saying it did not

track meetings with political intelligence firms. However, CMS does have policies in place

concerning the dissemination of information to the public.

On April 4, 2013, the WSJ reported that Height Securities successfully predicted CMS’s

policy decision on MA plans. Height Securities sent out an alert to clients at 3:42 pm

successfully predicting CMS’s policy decision on MA. This had major consequences on the

market.

You sent a letter on April 4, 2013, asking CMS who they told this information to prior to

publicly releasing the information. This question follows up on your most recent letter to

CMS.

Lead-In: Ms. Tavenner, I have been impressed with you in our meetings. I think you

would make a fine Administrator and want to be able to support your confirmation. But

we have a problem here.

On Monday, April 1, 2013, at 3:42 p.m., Height Securities sent an advisory that told their

clients of the CMS Medicare Advantage policy decision and that they supported related

stocks.

The consequence of a political intelligence firm having access to this information 18

minutes before the market closed was astonishing.

In the 18 remaining trading minutes on April 1, the volume of Humana,

UnitedHealthGroup, and Aetna’s stock was more than a half BILLION dollars! More

stock in those companies was traded in those 18 minutes than throughout the rest of the

day. When information leaks from the Administration that has the ability to cause

significant market movement, it is wrong and quite possibly illegal.

I sent a letter last Thursday formally seeking specific information from you. Ultimately

you are responsible here.

What you are doing to hold someone accountable for this leak?

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Answer: I share your concern with the news that an outside entity issued an advisory about the

2014 Medicare Advantage rates before CMS announced the rates. Given the seriousness of the

issue, the HHS Acting General Counsel has referred the matter to the HHS Office of Inspector

General. As you know, the IG has the investigative expertise to request and review relevant

agency documents and to conduct any interviews with agency personnel that it deems necessary.

I am committed to ensuring that CMS safeguards confidential and non-public information and

intend to use the results of the OIG investigation to improve our processes as appropriate. I

appreciate what you have done in this area and look forward to working with you to safeguard

sensitive government information.

Question 2

IF TAVENNER SAYS THAT SHE DOES NOT KNOW WHO THE LEAK WAS AND

THAT IT WASN’T CMS AND THEY ARE CONDUCTING THEIR OWN

INVESTIGATION.

Thank you, Ms. Tavenner. I appreciate that you have started an investigation of your own.

For it to be credible, you need to be including the Health and Human Services, Office of

Inspector General. I’d be curious what authority your investigation has to compel the

production of information within CMS. I’d be even more curious what authority your

investigation has to compel the production of information at HHS, OMB or the White

House.

But how about his … why don’t we work together?

You can speak softly and I will bring a big stick.

I don’t believe you can get to folks at HHS or OMB or the White House without help.

The sooner we figure out where the leak is, the sooner we can get you confirmed.

Question 3

Last year, CMS suspended implementation of the Quality Indicator Survey (QIS) for

nursing homes. Why did CMS suspend implementation of the QIS? When will CMS

resume implementation? How long do you expect it will take CMS to complete QIS

training in every state? How do you plan to avoid similar complications or any other

problems that would prevent a quick transition to the new survey system?

Answer: CMS temporarily suspended implementation of the QIS based on feedback from states

and regions about some hardware and software issues that could impact time on surveys or

survey effectiveness. In addition, survey time for the QIS States has tended to exceed the survey

time required for the traditional survey. This will require some redesign of the QIS survey

before we can enable expansion to additional States within the available survey budget. We

determined that addressing and resolving these issues before further implementation would

facilitate a more effective computer-assisted survey process.

CMS has already begun to bring on a few additional states through partnerships with states that

have already successfully implemented QIS. We are evaluating the ability to bring on each new

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state and are also looking at a multi-year strategy for completing the transition to QIS in all

states. While we continue to address issues related to hardware, software, and survey time

required for the QIS survey are resolved, CMS will continue to take a very deliberate approach

to expanding QIS to additional states.

We anticipate that completing QIS training in all states will take several years, especially in the

largest states. CMS is also exploring new training strategies such as regional and state-based

training models with reduced time to competency.

Question 4

Last year, CMS promoted an initiative to address overutilization of antipsychotics in

nursing homes. The stated goal of the initiative was to reduce antipsychotic use 15 percent

by the end of 2012. Early projections indicate the initiative yielded an underwhelming four

percent decrease. What caused the initiative to fall so short of its goal? Do you plan to

continue the initiative this year? If yes, what are the goals for 2013 and what will CMS do

to meet those goals?

Answer: The Partnership to Improve Dementia Care is a national partnership to improve

dementia care and optimize behavioral health for nursing home patients. By improving dementia

care and person-centered interventions for behavioral health in nursing homes, this collaboration

between federal and state partners, providers, advocacy groups, and caregivers set an ambitious

goal; to reduce the national prevalence rate of antipsychotic medication use in nursing home

residents by 15 percent by the end of 2012.

Partners used strategies such as enhanced training, increased transparency, and alternatives to

antipsychotic medication to work toward this goal. In addition, to address this challenge in the

long-term CMS is conducting research to better understand the decision to use antipsychotic

drugs in residents with dementia. Findings will be used to target and implement approaches to

improve the overall management of residents with dementia, including reducing the use of

antipsychotic drugs in this population.

Early indications suggest that we are nearly halfway to our initial, ambitious goal. Additionally,

partner reported data indicates that three states have met or exceeded the 15 percent goal. Given

the short amount of time the Partnership has been working, we consider this reduction a modest

success. We also have data that suggests this rate of reduction may be increasing; more states

and regions have become partners and are implementing changes. CMS believes that this

initiative is facilitating changes that will be sustainable over time, and we will continue efforts to

reduce the use of unnecessary antipsychotic medication in nursing homes. We intend to continue

the National Partnership and believe that we will reach the goal of 15 percent reduction in the

national prevalence rate in 2013.

Question 5

Accurate information about staffing levels is one of the most important quality indicators

to measure nursing home quality. The current collection method allows nursing homes to

self-report staffing data which has proven to be terribly unreliable. The Affordable Care

Act required CMS to start collecting staffing data from payroll records, agency contracts,

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and cost reports. The deadline to implement this requirement was March 2012. Why has

CMS still failed to implement this important reform? What has CMS done to move toward

this new data collection method and when will it be fully implemented?

Answer: As part of a long-term plan to increase the accuracy and comprehensiveness of staffing

data, CMS has been evaluating the use of payroll data as a basis for the information on Nursing

Home Compare. Payroll data can be used to calculate measures of staff turnover and staff

retention in addition to supporting more accurate calculation of the staffing measures currently

posted. A two phase field study of the feasibility of collecting payroll data was completed. The

first phase involved interviewing nursing homes, nursing home corporations, and payroll

vendors. The second phase included providing data specifications to a sample of facilities to

determine their capacity to generate and submit data. This second phase was achieved through a

payroll-based staffing reporting pilot program in approximately 100 nursing homes in June 2012.

This pilot program ended in December 2012 and yielded a great amount of complex data. As we

analyze the results of the pilot project, we will work to determine the amount of resources

needed to continue implementing this provision of the Affordable Care Act.

Questions from Senator Crapo

Question 1

Regarding Ambulatory Surgical Centers - In a recent article in TIME Magazine called “A

Bitter Pill: Why Medical Bills Are Killing Us.” One of the conclusions of the increase in

Medicare payments is the lack of competition and too much consolidate among hospitals in

the nation. I have historically been an advocate of choices and competition in the

healthcare marketplace. Unfortunately, there is a growing trend of physician practices,

Ambulatory Surgical Centers, oncology centers and other providers being purchased by

hospitals. In April, I requested data, with several of my colleagues on the impact that these

purchases/conversions had on ASCs. I received a final answer in September. Is there

something that Congress needs to do to provide CMS with greater statutory authority to

measure how these changes are impacting costs in the Medicare program?

Answer: We are aware that hospital acquisitions of other health care entities such as physician

practices have been commonplace in the last few years. One of the ways that we are

encouraging competition in hospital markets is through the operation of the Medicare

accountable care organizations (ACOs). We believe that competition among ACOs will foster

improvements in quality, innovation, and choice for Medicare beneficiaries. The antitrust

agencies (Department of Justice and Federal Trade Commission) are monitoring the competitive

effects of ACOs. These agencies issued guidance for providers seeking to become ACOs and

established a voluntary expedited review process to give feedback to providers on potential anti-

competitive activities.

CMS is providing aggregate claims data to the antitrust agencies to assist them in their

monitoring efforts to ensure ACO formation and implementation does not have a detrimental

effect upon competition. The antitrust agencies have existing enforcement processes for

evaluating concerns raised about an ACO’s formation or conduct. In addition, we believe the

testing of the Advance Payment ACO model had led to increased participation by smaller

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organizations in the Medicare Shared Savings Program, thus increasing competition. I would be

happy to work with you and your staff on how we can improve on these efforts.

We also understand the published fiscal year 2012 Work Plan for the Department of Health and

Human Services Office of Inspector General (OIG) includes work related to ASCs. Specifically,

they plan to do an ASC payment analysis and also relayed an interest in looking into hospital

acquisitions of ASCs. We look forward to the OIG findings and recommendations.

Question 2

Medicare Part D - In its 2014 Call Letter, CMS identified potential issues with preferred

networks in the Part D program. Specifically, CMS expressed concern that preferred

networks may be costing the Medicare program more than open networks, and beneficiary

access to care may be threatened especially in rural areas. This is worrisome to me because

the Part D program was made to drive down costs to the system and ensure more choice

and access to beneficiaries and has been delivering on this goal so far.

Can you tell me what potential issues CMS has identified with preferred networks and

what CMS plans to do to make sure that preferred networks in Medicare Part D plans are

not hindering beneficiary access to their prescriptions and are following their current goal

of decreasing costs in the Part D program?

Answer: Part D regulations that permit lower cost sharing at some “preferred” network

pharmacies also require that such cost sharing reductions must not increase CMS payments. In

order to ensure that Part D sponsors with preferred pharmacy networks are meeting this

requirement, we have begun to scrutinize Part D drug costs in PDPs with preferred networks, and

comparing these to costs in the non-preferred networks, as well as to costs in PDPs without

preferred networks. Our initial results suggest that for some plans, aggregate unit costs weighted

by utilization (for the top 25 brand and top 25 generic drugs) may be higher in preferred

networks than in non-preferred networks. Combined with lower cost sharing, we are concerned

that these higher unit costs may violate the requirement not to increase payments to such plans.

We have contacted the plan sponsors identified in our analysis to initiate the validation of our

findings.

As we indicated in the 2014 Call Letter issued April 1, we strongly believe that including any

pharmacy that can meet the terms and conditions of the preferred arrangements in the sponsor’s

preferred network is the best way to ensure that such networks promote price competition and

lower costs in the Part D program. Opening preferred pharmacy networks to any pharmacy that

can meet the network’s terms and conditions would also likely mitigate some beneficiary

disruption and travel costs, especially in rural areas. Extending this policy to all Part D sponsors

would require rulemaking by CMS. We welcome your ideas to ensure that the Part D program

remains strong.

Question 3

Regarding Patient Protections- Non-Discrimination Rule - In Round 1 of CBP, suppliers

limited the range of products offered to Medicare beneficiaries. CMS anticipated this

problem in the CBP and established a rule that requires, “The items furnished by a

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contract supplier…must be the same items that the contract supplier makes available to

other customers.” CMS reasoned, One of the main objectives of the Medicare DMEPOS

Competitive Bidding Program is to ensure that beneficiaries have access to quality

DMEPOS. Therefore, we have built safeguards into the competitive bidding program to

ensure there is continued access to quality medical equipment and supplies. We believe the

nondiscrimination clause will ensure that Medicare beneficiaries have access to the same

items as other as individuals.

CMS wanted to ensure that Medicare beneficiaries receive the same items that the contract

supplier would furnish to other customers.

Given that Congress extended the CBP single payment amount to retail settings, retailers

will now have the same financial incentives to limit the range of diabetes testing supplies

available. A group of stakeholders recently asked CMS to extend these patient protections

to the retail channel, and CMS responded that it would monitor implementation to see if

these protections prove to be necessary. If CMS felt that these protections were necessary

to protect beneficiaries in anticipation of the CBP in mail order contexts, why does the

agency not think that these same protections will be necessary in retail settings? Why wait

and monitor?

Answer: Retail pharmacies do not have the same incentives to provide certain items as mail-

order contract suppliers. We note that retail pharmacies do not have to bill Medicare on an

assignment-related basis, while mail-order contract suppliers do, and therefore can charge

customers more than the Medicare-approved amount for diabetic test strips (which is commonly

referred to as balance billing). Notice and comment rulemaking was required to include the non-

discrimination requirement as a term of the contract for suppliers under the national mail-order

program for diabetic testing supplies. CMS will be closely monitoring access to necessary

diabetic supplies following implementation of the new payment amounts, but we do not believe

it is necessary to initiate rulemaking for the retail setting at this time.

Questions from Senator Isakson

Question 1

The Patient Protection and Affordable Care Act reduces Medicare spending by $750 billion

over the next 10 years to pay for new health care programs. One of the largest of the law’s

Medicare cuts is a “productivity adjustment” that reduces the annual inflation updates to

provider reimbursements. These productivity adjustments will have a compounding effect

over time, and when the law was passed, the CMS Office of the Actuary projected that they

would cause about 15 percent of hospitals, skilled nursing facilities, hospices, and other

Part A providers to become unprofitable within the next 10 years. I am concerned that this

may have an especially severe impact on rural areas, where providers are less able to shift

costs to patients with private insurance. Already this year, two rural hospitals in my state

have been forced to close their doors and have cited reimbursement cuts as a major factor.

Do you believe your actuaries’ projection is accurate? What are you doing to monitor the

impact of these cuts and how will you act to prevent Medicare beneficiaries from losing

access to care when their local providers close down?

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Answer: The Affordable Care Act includes a number of important delivery system reforms that

will enable Americans to get better care at lower costs and will help the health care system

operate more efficiently. We continue to carefully monitor access to services, and to date, access

to services remains strong. Hospitals will also benefit from the insurance coverage expansions in

the Affordable Care Act, adding new sources of revenues for most health care providers.

Furthermore, a number of provisions in the Affordable Care Act designed to strengthen the

health care workforce, such as Medicare payment bonuses for primary care providers and

providers in underserved areas and investments in health professional training programs to

increase supply. We will continue to carefully monitor access to ensure our policies continue to

lower costs while maintaining access to quality services.

Question 2

I appreciate the work you and CMS have been doing to move the Medicare payment

system away from silos and toward rewarding high-value care. One area where I’ve been

concerned that current payment policies do not support the provision of the right care in

the right setting is the lack of coverage for infusion therapies that can be provided in the

home setting. In many cases, receiving infusion treatment at home is clinically appropriate

and has the potential to reduce costs as well as preventing hospital acquired infections.

Many private payers provide coverage for home infusion and have achieved positive

results, but Medicare still lacks coverage for many of the services and supplies associated

with home infusion. Would you agree that we ought to explore Medicare coverage for

home infusion therapy to ensure that seniors and people with disabilities have access to this

life-preserving treatment in whatever setting is most clinically appropriate and convenient

for them?

Answer: We agree that it is important that seniors and people with disabilities have access to

life-preserving treatment in the most clinically appropriate setting. Medicare covers certain

items and services for home infusion therapy. Generally, infusion pumps, as well as drugs and

other supplies necessary for the effective use of the infusion pumps, are covered under the

durable medical equipment (DME) benefit under Medicare Part B for treatment of certain

conditions. In addition, the services of a home health nurse required to administer the

medications safely and effectively may be covered under the home health benefit for those who

qualify for home health services, provided the services are reasonable and necessary to the

treatment of the illness or injury. Home infusion supplies are covered under the home health

benefit, only when related to “gravity” infusion. Beneficiaries who do not qualify for home

health services have access to these services and supplies in hospitals, outpatient departments,

and physician offices. Infusion drugs are also covered for those enrolled in the Part D benefit.

The Part D plan is responsible for ensuring that beneficiaries have the necessary services and

supplies for home infusion therapy before dispensing the infusion drugs.

Medicare does not have a distinct home infusion benefit. Adding a home infusion benefit to the

Medicare program would require a statutory change. In the recently enacted, “Medicare IVIG

Access and Strengthening Medicare and Repaying Taxpayer Act of 2012,” CMS is required to

establish and implement a demonstration project under Medicare Part B to evaluate the benefits

of providing payment for items and services needed for the in-home administration of

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intravenous immune globin. This demonstration project may provide insight into the benefits of

a Medicare home infusion therapy benefit.

Question 3

Children with complex medical conditions represent approximately five percent of the

children enrolled in Medicaid, but account for about 45 percent of Medicaid spending on

children. Medicaid is critical to this population, but often our current system leaves them

with fragmented care that does not work for them. How do you envision CMS will

approach improving care coordination for children with complex medical needs and how

will CMS partner with stakeholders as it addresses the needs of this population in

Medicaid?

Answer: CMS is working with state Medicaid programs to test medical homes for individuals

with disabilities and complex health conditions, including high-risk chronically ill children.

These Health Homes will operate under a “whole-person” philosophy to integrate and coordinate

all primary, acute, behavioral health, and long-term services and supports to treat the whole

person. Some of the Innovation Challenge Awards are also testing new ways to better care for

such children, such as extending the skills available at a children’s hospital to communities to

care for children with chronic illness like asthma.

Additionally, CMS has released the Initial Core Set of Child Health Care Quality Indicators for

Medicaid and CHIP, established for voluntary use by state Medicaid and CHIP programs, which

includes a range of children’s quality measures encompassing both physical and mental health,

including chronic conditions such as asthma and diabetes. CMS’ Pediatric Quality Measures

Program and the Pediatric Electronic Health Record Format also represent other initiatives the

agency is pursing to help improve the health and care children enrolled in our programs receive.

Question 4

At a February 14 hearing before the Senate Finance Committee, I asked CCIIO Director

Gary Cohen about the Administration’s preparations for transitioning enrollees in the Pre-

existing Condition Insurance Plan (PCIP) to coverage through the exchanges. Public health

officials in my state have been concerned about the lack of a clear plan for ensuring

continuous care for these vulnerable patients. I was somewhat disturbed that while Mr.

Cohen did not answer my question about whether the Administration expected to cut off

enrollment in federally-run PCIPs, CMS announced the following day that new enrollment

would be cut off effective immediately. In a subsequent conversation with my staff, CMS

staff acknowledged that they will need to issue additional guidance regarding the

“handoff” of enrollees from PCIP to federal exchanges, but could not provide any

information about when this guidance might be issued. When will CMS issue detailed

guidance on how you plan to transition enrollees from PCIPs to federally facilitated

exchange coverage? Also, what is CMS’s contingency plan in the event that PCIP funding

runs out before exchanges are ready for enrollment?

Answer: Open enrollment for plans in the new Marketplaces begins October 1, 2013, for

coverage beginning January 1, 2014, which generally coincides with the statutory end of the

PCIP program. To help effectively transition PCIP members who wish to enroll in a qualified

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health plan offered through the new Marketplaces, we are working with our PCIP contractors to

ensure enrollees in both state-based PCIPs and the federally-administered program receive

information about the new Marketplace. Specifically, we are developing three notices that will

be sent to enrollees in federally-administered PCIP over the next several months explaining that

PCIP coverage ends after December 31, 2013, describing the Marketplaces, how to enroll in

coverage, and where enrollees can get assistance with enrolling in coverage. Additionally, we

have directed our contractors to update their PCIP websites with transition content, train

customer service representatives, and provide adequate staffing at their call centers during the

last quarter of calendar year 2013 and the first quarter of calendar year 2014 to handle

anticipated calls from transitioning enrollees. CMS is aggressively managing costs in the federal

PCIP program and has taken a variety of steps to ensure that the limited funds provided by the

Affordable Care Act are applied efficiently in funding patient care and program administration.

These include a change in provider networks used by the federally-administered PCIP, reducing

both its negotiated and out-of-network payment rate for providers; negotiation of additional

discounts on reimbursement rates with targeted hospitals that were treating a disproportionate

number of PCIP enrollees; limiting the specialty drug benefit to provide coverage only if the

specialty drug is dispensed by an in-network pharmacy, and; consolidation of three benefit plan

options into one, increasing the maximum out-of-pocket limit from $4,000 to $6,250 for in-

network services.

Question 5

Over 5 million people in the United States have Alzheimer’s disease. Getting a clear and

early diagnosis is an important part of addressing this disease. Leading experts, including

HHS’s own Alzheimer’s website, stress the value of a timely and accurate diagnosis of

Alzheimer’s disease. Early diagnosis allows families to better plan for the course of the

disease and caregiving needs, and it allows patients and medical experts to explore various

treatments that may be able to help delay or mitigate symptoms associated with

Alzheimer’s. Diagnosing Alzheimer’s has long been a challenge for the medical community,

but new technologies are emerging that can help determine whether memory problems are

resulting from Alzheimer’s or another condition. What will you do to ensure that Medicare

beneficiaries have appropriate and timely access to these diagnostic tools and other new

innovations as they are approved by FDA?

Answer: CMS agrees that tackling Alzheimer’s disease is a national priority. We are an active

participant in the National Plan to Address Alzheimer’s Disease, established by the Department

of Health and Human Services (HHS) pursuant to the National Alzheimer's Project Act (NAPA)

enacted in January 2011. The National Plan sets forth five goals, including the development of

effective prevention and treatment approaches for Alzheimer's disease and related dementias by

2025. A National Alzheimer’s Project Advisory Council (including a senior CMS

representative) meets quarterly to discuss the efficacy of government programs in this area, and

annually evaluates and updates the National Plan.

We are also actively engaged in reviewing new technology to ensure timely access to innovation

for our beneficiaries. In October 2012, we opened a National Coverage Analysis (the first step in

the National Coverage Determination (NCD) process) to reconsider a prior NCD on the use of

Positron Emission Tomography (PET) scans, which provided national coverage of PET using

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only specified radioisotopes for certain indications, and conditional coverage for additional uses

under the process known as Coverage with Evidence Development (CED). Reconsideration of

this NCD was requested by a stakeholder to consider coverage of PET using a new type of

radiopharmaceutical approved by the FDA in 2012 to image beta-amyloid plaques in certain

patients being evaluated for Alzheimer’s disease and other causes of cognitive decline. To help

inform this evidence review, we convened a meeting of the Medicare Evidence Development and

Coverage Advisory Committee (MEDCAC) in January 2013. A proposed coverage decision is

expected by July 2013, with a final decision (including consideration of public comments)

expected by October 2013.

Question 6

Hospitals in my state have raised a number of concerns about Medicare’s Recovery Audit

Contractor (RAC) program, arguing that compliance with RAC audits is a severe burden

on both their finances and time, and that the vast majority of RAC denials are overturned

on appeal. The RACs maintain that they are working to safeguard the Medicare Trust

Fund by correcting improper payments, and that only a small percentage of their

recoveries are overturned. Given your background as a hospital administrator, I would be

interested to hear your personal views on how this program is working. What, if any, steps

is CMS taking to ensure that there is an adequate balance between protecting the Trust

Fund and avoiding an undue burden on health care providers who are trying in good faith

to comply with the law? To the extent that a significant number of RAC denials are being

overturned, especially at the Administrative Law Judge level, are there structural changes

that could be made to the program to improve consistency and sharpen the focus on truly

improper payments?

Answer: Recovery Audit Contractors are an important tool in reducing improper payments and

recovering overpayments. CMS is sensitive to the concerns of hospitals and suppliers, and

continues to work with these communities to reduce the burden of the Recovery Audit review

process. CMS has undertaken several efforts to help reduce provider burden. These include

imposing additional limits on the number of medical records a Recovery Auditor may request,

ensuring claims are not being reviewed by multiple Medicare entities, and allowing providers to

send medical documentation electronically to Recovery Auditors. CMS understands that

additional staffing is often required to address Recovery Auditor documentation request and we

are constantly working to ensure providers can respond to requests without compromising

beneficiary care.

CMS also strives to reduce the appeal rate to decrease provider burden and administrative costs.

Recovery Auditors are required to return any contingency fee if an improper payment is

overturned on appeal, which creates an incentive to make accurate improper payment

determinations. In FY 2011, 2.9 percent of all Recovery Auditor determinations were overturned

on appeal. In addition, Recovery Auditors are subject to performance evaluations that hold them

accountable for activities such as timely reviews of audits.

Question 7

The Patient Protection and Affordable Care Act included several incentive programs for

primary care physicians. While I agree that we need to increase the primary care

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workforce, I have heard concerns from some physician groups that these incentive

programs do not adequately account for the need for cognitive care specialists, such as

neurologists and rheumatologists. These specialists primarily bill Medicare under

evaluation and management (E&M) codes, rather than procedural codes, and are not as

highly compensated as the procedural specialties. However, they are ineligible for incentive

programs that are specifically targeted to primary care. The March 2013 report of the

National Commission on Physician Payment Reform, chaired by former Senate Majority

Leader Bill Frist, recommended that physician payment reform should differentiate

between E&M codes and procedural codes, rather than between primary care physicians

and specialists. Would you agree that efforts to strengthen the primary care workforce

should also include cognitive specialties that are similarly facing workforce shortages?

Answer: Ensuring that beneficiaries of our programs have access to providers to furnish the

care they need is important. We support efforts to strengthen the health care workforce that

provide the full range of services that a beneficiary needs including the services of cognitive

specialties. We recognize that a range of responses is needed to address workforce shortages in

various geographic areas and among different specialists. I look forward to working with you to

continue to develop and implement measures to address this issue.

Question 8

Round 2 of the durable medical equipment competitive bidding program is set to take

effect on July 1 in 91 metropolitan areas across the country, including Atlanta and

Augusta. Suppliers in my state are very concerned about the sustainability of this program

in its current form. I have heard anecdotal accounts of companies winning bids despite

having no presence in the local region and no demonstrated ability to supply the type of

medical equipment for which they were bidding. Some winning bidders appear to be

desperately trying to find existing suppliers to subcontract, or even sell their business. Also,

due to the “median price” structure employed by CMS, some suppliers report being

offered contracts at prices significantly below their bids. If these suppliers determine they

cannot accept the offered price, it is unclear to me how Medicare plans to ensure that there

is adequate capacity to supply beneficiaries in these markets. What specific mechanisms

are you putting in place to ensure that any access issues arising in Round 2 regions are

promptly identified, and how will identified problems be corrected? What steps are you

taking to monitor and verify the quality of DME supplies under competitive bidding?

Answer: CMS is confident that the Round 2 and national mail-order program single payment

amounts provide appropriate payment for the equipment, supplies and related services. All

bidders are evaluated to ensure that they meet all applicable state licensure requirements,

financial standards, quality standards and accreditation requirements, and other program

requirements. All bids submitted under the program are screened and evaluated to ensure that

they are bona fide. CMS selects more than enough qualified suppliers to meet beneficiary

demand for each product category in each area.

In addition, CMS has implemented a robust monitoring program to track and resolve any issues

that might occur with program implementation. To date, the program has maintained beneficiary

access to quality products from accredited suppliers in the Round 1 Rebid areas. Extensive real-

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time monitoring data have shown successful implementation with very few beneficiary

complaints and no negative impact on beneficiary health status based on measures such as

hospitalizations, length of hospital stay, and number of emergency room visits compared to non-

competitive bidding areas. In addition to our real-time claims monitoring, CMS also requested

feedback from beneficiaries through consumer satisfaction surveys conducted before and after

the rollout of the program. CMS provides a local, on-the-ground presence in each competitive

bidding area through the CMS regional offices and local ombudsmen, who closely monitor

implementation of the program. There is also a formal complaint process for beneficiaries,

caregivers, providers and suppliers to use for reporting concerns about contract suppliers or other

competitive bidding implementation issues. In addition, contract suppliers are responsible for

submitting quarterly reports identifying the brands of products they furnish, which is used to

inform beneficiaries, caregivers, and referral agents. Finally, CMS has appointed a Competitive

Acquisition Ombudsman who responds to complaints and inquiries from beneficiaries and

suppliers about the application of the program and issues an annual Report to Congress. CMS

will employ the same aggressive monitoring program for the competitive bidding areas added in

Round 2.

And to the extent an issue arises, CMS will act promptly to address it. If a supplier does not

meet its contractual obligation, CMS may take one or more of the following actions: require the

contract supplier to submit a corrective action plan; suspend the contract supplier’s contract;

terminate the contract; preclude the contract supplier from participating in the competitive

bidding program; revoke the supplier’s billing privileges; or impose other remedies allowed by

law.

With regard to the quality of supplies, Medicare requires that all suppliers in the program meet

applicable state licensure requirements, meet strict quality and business standards, and be

accredited by a national accreditation organization. Quality product-specific service standards

include intake, delivery and setup, training and instruction of the beneficiary and/or their

caregiver, and follow-up service. Business standards focus on administration, financial

management, human resource management, consumer services, performance management,

product safety, and information management. The quality standards ensure that Medicare

beneficiaries only receive products as ordered by their physician. Products must meet applicable

quality standards and be provided by qualified professionals.

The program includes an anti-discrimination policy, meaning that suppliers have to offer their

Medicare beneficiaries the same products they offer their other customers. This applies to all

product categories.

All items furnished under the competitive bidding program must meet applicable Food and Drug

Administration requirements, including regulation and medical device effectiveness and safety

standards. CMS believes beneficiaries are receiving quality items under the competitive bidding

program because the agency has received few inquiries and complaints about the program and

because the real-time monitoring shows that there have been no changes in beneficiary health

status outcomes resulting from the competitive bidding program.

Question 9

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CMS recently responded to a letter that I sent along with Senator Chambliss regarding CY

2013 changes in Medicare reimbursement for proton beam therapy. Emory University is

currently developing the Georgia Proton Therapy Center, a state-of-the-art facility that

will bring this life-saving treatment to residents of Georgia. In the response to our letter,

CMS stated that “we did not exclude the purportedly aberrant data in setting the final CY

2013 payment rates for these services.” I continue to have serious concerns with CMS’s

action because it is my understanding that only three hospitals submitted cost report data

with respect to this therapy, and one of them subsequently identified an error in the initial

data submission and provided corrected data. Does CMS have any process for addressing

errors of this nature, particularly in cases like this where one entity’s cost report can have

a significant impact on the aggregate data? Will you commit to working with us to ensure

that this erroneous data is not perpetuated in future rate setting processes?

Answer: We understand your concern that payment for these proton beam therapy services be

accurate in order to provide these services to Medicare beneficiaries. Because few hospitals bill

Medicare for proton beam therapy, and because we rely on the data submitted to us by hospitals

in setting annual hospital outpatient prospective payment system (OPPS) rates based on our

standard OPPS rate setting methodology, the payments for these services may vary over time.

Each year, CMS updates payment rates using claims and cost report data reported by hospitals

that pass edits and are paid through our claims processing system. An integral part of this

process is our reliance on hospitals to code claims accurately and to submit accurate cost report

information on a timely basis. CMS will update the OPPS payment rates this year for the CY

2014 rates, once again using the most recently available claims and cost report data submitted by

hospitals and relying on hospitals to ensure accuracy of the data submitted.

Question 10

Section 644 of the American Taxpayer Relief Act of 2012 rescinded most unobligated funds

for the Consumer Operated and Oriented Plan (CO-OP) Program. It also created a reserve

fund of approximately $190 million to provide “assistance and oversight” to health

insurance issuers who had already received loans or grants under the program. I was

recently contacted by an organization in my state that had applied for CO-OP funding.

Since they did not receive an award prior to the end of 2012, they understand that they will

not be eligible to receive start-up funding. However, they noted that CMS’s original

funding announcement stated that applicants could receive up to $100,000 to cover the cost

of preparing a feasibility study and business plan. Since they had already incurred this cost

prior to the rescission, they are trying to determine whether they can still obtain

reimbursement for these expenses and have not been able to get an answer from CMS on

this question. Could you look into this issue and determine whether CMS has the authority

to provide this limited reimbursement for already-incurred expenses from the CO-OP

contingency fund?

Answer: The CO-OP Funding Opportunity Announcement noted that costs up to a total amount

of $100,000 for preparing the feasibility study and business plan required with the application

was considered an eligible cost for the Start-Up Loans. Loans for these costs were only provided

to successful applicants who were awarded Start-Up Loans.

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As you know, the American Taxpayer Relief Act of 2012 (Pub. L. 112-240) transfers 10 percent

of the unobligated balance of funds appropriated by section 1322(g) of the Affordable Care Act

to a new CO-OP contingency fund and rescinds the remaining 90 percent of the unobligated

funds. Due to this change in statute, CMS no longer has the authority to make loan awards to

new borrowers or enter into loan agreements with new borrowers. As a result, CMS denied all

applicants who did not have loan agreements in place by December 31, 2012 deadline.

Questions from Senator Enzi

Question 1

The Medicare Trustees concluded in their 2012 report that the Medicare Advantage cuts

included in the health care reform law would result in a 10 percentage point drop in

enrollment in the program due to the increased premiums and reductions in benefits that

would result. What is the updated estimated impact on Medicare Advantage premiums and

benefits by the CMS Office of the Actuary on the combined impact of the Medicare cuts in

the health reform law on Medicare Advantage and the health insurance tax?

Answer: The Medicare Advantage (MA) program remains a strong and viable option for

Medicare beneficiaries. MA premiums for 2013 are stable, increasing less than a $1.50 from last

year and as of February 2013; total MA enrollment is 14.5 million, up from 13.1 million in 2012,

an increase of 11 percent. Beneficiary access to the MA program also remains strong, with 99.6

percent of beneficiaries having access to a MA plan.

The number of non-employer MA plans for 2013 is 2,704, up from 2,532 in 2012, a 7 percent

increase. The average number of MA plans available in a county increased to 28 plans in 2013

compared to 26 plans in 2012.

The 2013 Trustees Report will provide updated enrollment and other information regarding the

Medicare Advantage program.

Question 2

In the recently released Call Letter for the 2014 plan year CMS identified concerns it had

with the use of preferred pharmacy networks in the Medicare Part D program,

particularly the potential for beneficiary disruption and travel costs, especially in rural

areas. CMS also indicated it was concerned that the structure of some preferred networks

may actually be increasing costs for the Medicare program.

As the use of these networks has become more widespread in recent years and is expected

to continue to grow, what actions has CMS taken, or does CMS plan to take, to ensure that

the use of preferred pharmacy networks in the Medicare Part D program does not affect

beneficiary access and health, lessen quality of care or increase costs to the Medicare

program?

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Answer: Part D regulations that permit lower cost sharing at some “preferred” network

pharmacies also require that such cost sharing reductions must not increase CMS payments. In

order to ensure that Part D sponsors with preferred pharmacy networks are meeting this

requirement, we have begun to scrutinize Part D drug costs in PDPs with preferred networks, and

comparing these to costs in the non-preferred networks, as well as to costs in PDPs without

preferred networks. Our initial results suggest that for some plans, aggregate unit costs weighted

by utilization (for the top 25 brand and top 25 generic drugs) may be higher in preferred

networks than in non-preferred networks. Combined with lower cost sharing, we are concerned

that these higher unit costs may violate the requirement not to increase payments to such plans.

We have contacted the plan sponsors identified in our analysis to initiate the validation of our

findings.

As we indicated in the 2014 Call Letter issued April 1, we strongly believe that including any

pharmacy that can meet the terms and conditions of the preferred arrangements in the sponsor’s

preferred network is the best way to ensure that such networks promote price competition and

lower costs in the Part D program. Opening preferred pharmacy networks to any pharmacy that

can meet the network’s terms and conditions would also likely mitigate some beneficiary

disruption and travel costs, especially in rural areas. Mandating this policy for all Part D

sponsors would require rulemaking by CMS. We welcome your ideas to ensure that the Part D

program remains strong.

Question 3

The OIG recently released a report stating that gaps exist in CMS’s oversight of the

Medicare Plan Finder reporting requirements. How is CMS ensuring that beneficiaries

have access to all of the information they need about specific plan benefits, including

whether or not a plan uses a preferred pharmacy network and which pharmacies are

included in those networks?

Answer: The Medicare Plan Finder continues to be refined to make sure that it provides the

most accurate information possible. As of April 2012, a beneficiary is now able to see drug price

estimates that reflect if the pharmacy selected is preferred or non-preferred for a given plan. If a

pharmacy is not in the selected plan’s network, the full price of the drug is shown. Concerns

about the Medicare Plan Finder being time-consuming may be a reflection of the increased

number of inputs needed to generate an accurate cost estimate. Having the Medicare Plan Finder

prompt the user for exact drug names, quantity and dosing regimen, Part D plan, subsidy

eligibility, and choice of pharmacy provides beneficiaries access to highly valuable information,

to help select the best coverage option and to anticipate medical expenses for the coming year.

Question 4

We have heard significant concerns from the kidney care community that patient access to

dialysis care could be disrupted if Medicare payments for End-Stage-Renal-Disease

(ESRD) are not properly designed and implemented. I share these concerns, especially as

they relate to patients in rural or underserved areas, and would appreciate your attention

to this issue. Will you commit to working with me and my staff to ensure that the

comprehensive ESRD bundled rate is adjusted fairly without harming patient access and

quality of care?

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Answer: We agree with the importance of appropriate payments to ensure access to dialysis

treatment for ESRD beneficiaries. Section 632 of the American Taxpayers Relief Act of 2012

requires that the ESRD prospective payment system (PPS) rate be reduced beginning in 2014 to

reflect the change in utilization of drugs and biological from 2007 with 2012. Before we make

any changes to the ESRD PPS rate, we will carefully analyze the data on utilization and include

the proposed payment change based on the data in a proposed rule for public comment. We will

review comments taking into consideration issues raised by stakeholders to ensure that

beneficiaries continue to have access to the medications they need before we make a final

decision on the payment change. I welcome your input to help us ensure that payments are

adequate and appropriate in the Medicare ESRD program.

Question 5

The 2006 IOM report on the Quality Improvement Organization (QIO) program stated

that the QIOs should remain state-based and that if CMS did not have such a local field

force to work on quality improvement, it would have to create it. Do you believe that any

efforts to regionalize the QIO program directly contradict those findings by IOM?

Answer: As we make plans to determine how to structure the QIO program in the 11th

SOW, we

are keenly aware of the recommendations made in the 2006 IOM report on Medicare’s Quality

Improvement Organization Program. This was a comprehensive and extensive study with

multiple recommendations, among them that the QIO program should be updated and focus more

on technical assistance for performance measurements and improvement. Many of the

recommendations have already been incorporated into the structure of the program in recent

years, and the added flexibility of the Trade Adjustment Assistance Extension act of 2011

provides an opportunity to incorporate enhancements that will allow us to achieve large scale

improvements in health care quality.

CMS is committed to the continued involvement of local physicians working in a community

with their peers. We agree that improvements in health care occur at the local level and that this

involvement is essential in many of the QIO improvement projects. While local access will be

maintained, some quality improvement activities may be carried out more effectively under a

modified structure that takes advantage of the most highly experienced and expert quality

improvement entities in a region.

Question 6

The federal government has invested considerable resources over the last three decades in

the QIO program so that relationships could be built, so that we could continue to learn

from past successes in an incremental way, and so that we could have a local field force

achieving maximum results. Do you feel that a massive switch toward regional QIOs would

undermine the current program by cutting those relationships and eroding institutional

knowledge after we’ve made such a giant investment in the program?

Answer: CMS is currently in the process of evaluating how to structure the QIO contracts in the

11th

Statement of Work (SOW) using the flexibility and new authority provided in the Trade

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Adjustment Assistance Extension Act of 2011. We plan to capitalize on the strengths and

institutional knowledge of the QIO program that have been built throughout the years.

Under the 11th

SOW that we are developing, we will ensure that no locality will lose access to a

Medicare QIO. While CMS is still determining the number of QIO contracts to be awarded, the

agency will require that every QIO—regardless of the size of its jurisdiction—reach providers

and beneficiaries at the local level. We also understand the importance of involvement of

physicians in the peer review process and understand that the best way improve health care is to

drive quality improvement at the local level.

Question 7

In your testimony, you state that “more than 6.3 million people with Medicare have saved

more than $6.1 billion on prescription drugs.” Please provide more details on how these

savings have been achieved. I am concerned that the incentives in the coverage gap of the

Part D program encourage people to remain with brand-name drugs, rather than switch to

cheaper generic products. What steps has CMS taken to incentivize the use of generic

drugs in the Part D program? What can Congress do to improve these incentives?

Answer: These savings resulted from the one-time rebate provided in 2010 to Medicare

beneficiaries who hit the Part D coverage gap, as well as the manufacturer discounts on brand

name drugs provided in the coverage gap. In addition to these savings, beneficiaries are saving

from increasing coverage for generic medicines in the coverage gap.

In 2010, Medicare beneficiaries who hit the coverage gap or “donut hole” in the Medicare

prescription drug benefit received a one-time $250 rebate, under the Affordable Care Act. In

2011, as a result of the Affordable Care Act, Medicare beneficiaries began receiving a 50 percent

discount on covered brand name drugs and coverage for 7 percent of the cost of generic drugs in

the coverage gap. In 2012, Part D covered 14 percent of the cost of generic drugs in the

coverage gap. Coverage for both brand name and generic drugs in the gap will continue to

increase over time until 2020, when the coverage gap will be closed.

The competitive Part D structure implemented through CMS regulation allows Part D sponsors

the flexibility to implement benefit designs, such $0 or low copays for drugs on the generic tier,

that incentivize beneficiaries to use lower cost generics. These incentives have been a key factor

in restraining the growth in per-capita Part D costs. In fact, the Office of the Actuary’s most

recent estimates of trends in per capita Part D costs is resulting in a decrease in the standard

deductible and out-of-pocket limit for 2014.

In terms of Congressional action to improve incentives for generic utilization in Part D, the

President’s FY2014 budget includes proposals to lower the generic copayment for beneficiaries

receiving the Part D Low Income Subsidy while raising copays for brand name drugs in

therapeutic classes where a generic is available and therapeutic substitution is appropriate. The

budget also includes proposals that would speed the entry of generic biologics onto the market

and prohibit brand and generic drug manufacturers from entering into agreements that delay

availability of new generic drugs and biologics.

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Questions from Senator Wyden

Question 1

Medicare Secondary Payer reimbursements have been an area of concern for me. At the

close of last Congress, the SMART Act (P.L. 112-242), which streamlined the Medicare

Secondary Payer system, became law. When do you expect to begin the process of

implementing the law?

I understand that CMS issued an Advanced Notice on Proposed Rulemaking on the issue of

payment of future medicals costs in reference to Medicare as a secondary payer last year.

In light of this Advance Notice, I want to be sure that changes will not impact the ability to

maintain and improve access to services and supports for those individuals who have

acquired a disability or chronic condition in relation to an unfortunate event resulting in a

liability settlement. What are you doing to ensure that this rule is fair and won’t result in

consumers losing access to health care? What are your plans, if any, for next steps

regarding this proposal?

Answer: Since the enactment of the SMART Act, we have reviewed the legislation and expect

to implement the law through notice and comment rulemaking so that stakeholders may provide

feedback on our planned implementation.

We received over 100 comments on the Advance Notice of Proposed Rulemaking (ANPRM) we

published on June 15, 2012. The ANPRM solicited public input on CMS’ proposed options to

address Medicare Secondary Payer (MSP) future medicals obligations, and it invited

stakeholders to propose additional options for resolving MSP future medicals obligations. As we

stated in the ANPRM, we intend to respond to comments received in response to the ANPRM in

future rulemaking, consistent with the SMART Act.

Question 2

Regarding Analysis of Possible Market Consolidation - Given the growing trend of

consolidation in the health care delivery system, what tools does CMS have at its deposal to

monitor the impact integration and consolidation may be having on the health system?

Similarly, what analysis – if any – is being done to identify the impact consolidation might

be having on Medicare spending? Finally, given the incentives for providers to come

together in integrated systems, how is CMS evaluating the impact that payment disparities

between sites might have in incentivizing consolidation of providers?

Answer: Our efforts to encourage competition in hospital markets include the operation of the

Medicare accountable care organizations (ACOs). We believe that competition among ACOs

will foster improvements in quality, innovation, and choice for Medicare beneficiaries. We

intend to ensure that appropriate monitoring of the competitive effects of ACOs is underway by

coordinating closely with the antitrust agencies (Department of Justice and Federal Trade

Commission) throughout both ACO application process and the Medicare ACO’s participation in

the Medicare Shared Savings Program. These agencies issued guidance for providers seeking to

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become ACOs and established a voluntary expedited review process to give feedback on

providers’ potential anti-competitive activities.

CMS is providing aggregate claims data to the antitrust agencies to assist them in their

monitoring efforts to ensure ACO formation and operation do not have a detrimental effect upon

competition. In addition, the antitrust agencies have existing enforcement processes for

evaluating concerns raised about an ACO’s formation or conduct.

In addition, we believe the testing of the Advance Payment ACO model has led to increased

participation by smaller organizations in the Medicare Shared Savings Program, thus increasing

competition.

I would be happy to work with you and your staff on how we can improve on these efforts.

Question 3

Regarding Appropriateness Criteria for Advanced Diagnostic Imaging Services - The

Medicare Improvements for Patients and Providers Act of 2008, or “MIPPA,” required

that CMS establish a two-year demonstration project beginning January 1, 2010, that

would examine and collect data regarding physician compliance with clinical

appropriateness criteria for advanced diagnostic imaging services. MIPPA also required

CMS to submit a report to Congress on the demonstration, including legislative

recommendations, within a year after completion of the demonstration. Incentivizing

appropriateness criteria may prove to be a far more effective way to prevent misuse and

over utilization than prior authorization and other arbitrary cuts to medical imaging. At

what point in 2013 will Congress receive the report from CMS on the results of this

imaging appropriateness demonstration?

Answer: The Medicare Improvements for Patients and Providers Act of 2008 required the

demonstration to be conducted for a 2-year period. The demonstration started on October 1,

2011 and is expected to conclude on September 30, 2013. The statute also requires the Secretary

to submit a report to Congress containing the results of the evaluation of the demonstration along

with recommendations for legislative and administrative action. This report is required to be

submitted not later than one year after the completion of the demonstration.

Question 4

Regarding Oregon’s 1915(k) Waiver - My state has been a longstanding leader in home and

community based services. Last September Oregon submitted a request for a Community

First Choice waiver, and they feel they have worked diligently with your workgroups on

this but it seems like there has been some conflicting information on the status of the

request. Oregon has been hopeful that this waiver can be approved by July 1. What

actions are necessary for Oregon to gain approval to implement the Community First

Choice provisions by July 1, 2013? Will you commit to review Oregon's application and

ensure it receives full and fair consideration?

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Answer: We applaud Oregon’s work in providing home and community-based alternatives to

institutional care. Our work with Oregon on its proposal is well underway and we are committed

to continuing our work with the state mindful of the state’s anticipated July 1 implementation.

Questions from Senator Portman

Question 1

I continue to have concerns regarding the Centers for Medicare & Medicaid’s (CMS)

competitive bidding program for durable medical equipment (DME). As we discussed

during the hearing, two of the nine bidding areas are located in Ohio. This summer those

nine bidding areas will expand to 91 areas, six of which will be in Ohio.

CMS has provided assurance that it is strengthening the bid review process to ensure that

low bids are sustainable for the suppliers. Can you describe the measures you have already

taken to strengthen the review process and what you will do before moving forward with

expansion of the program this summer?

If you find that the existing measures are not adequate to ensure winning bidders are

capable of supplying this equipment, would CMS be willing to delay the expansion planned

for round two?

Answer: We made numerous successful improvements to the program since the program started

and are continually looking at ways we can improve the process. For the Round 2 and National

Mail Order competitions, we increased our scrutiny of bids and enhanced our successful bidder

education program.

We already had a rigorous, comprehensive process in the Round 1 Rebid to check for low-ball

bids, which included the following steps: screening the bidders to verify that they meet all

requirements (i.e., that they are enrolled and accredited and meet financial standards, applicable

licensing requirements, and other bidding requirements); screening the bids from qualified

bidders using statistical measures to identify any bids that are very low in comparison to other

bids; asking bidders that submitted bids that fell below the statistical screening thresholds to

submit a rationale and documentation to prove that their bids are sustainable; and rejecting bids

that are not proven feasible (and are not used to set prices).

Even though we didn’t see any problems with low-ball bids in the Round 1 Rebid, we made the

following process enhancements for Round 2:

We improved our bidder education so that it more strongly emphasizes the need to submit

bids that include the cost for the supplier to buy the item, overhead, and profit.

We targeted our screening to focus more on the highest cost, highest volume items that

have the greatest impact on a supplier’s composite bid. We applied tougher screens to

these high cost, high volume items.

We had stricter rules about the information bidders could submit to prove that their bid

prices are realistic.

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The competitive bidding program includes many safeguards beyond the enhanced bona fide bid

evaluation process to ensure that there are a sufficient number of qualified suppliers to meet

beneficiary demand. We are confident that the single payment amounts for Round 2 and the

National Mail-order program provide appropriate payment for the equipment and supplies and

related services. Our comprehensive monitoring program has shown that the program has

preserved beneficiary health status and access to medically necessary items while saving money

for taxpayers and beneficiaries in the first nine areas. We will continue to aggressively monitor

the program in all 91 Round 2 areas to ensure that there are no negative effects on either access

or beneficiary heath status.

Question 2

I have heard from a number of Ohio business owners and their employees regarding the

definition of a “full time employee” as someone who works 30 hours per week. There is

significant concern that this will cause a shift of many full time employees to part time

status. It also appears that the effects of this provision are hampering the ability of

employers to hire even part time employees. The University of Akron recently announced

that it is planning to limit not only the number of part time employees, but also the number

of hours part time employees can work. The University Provost cited concerns stemming

from the Affordable Care Act (ACA) in the University’s decision-making. Several other

colleges and Universities in Ohio have already made similar changes to their hiring of part

time employees. This is just the latest example of the damaging effect the ACA is having on

hiring in Ohio and throughout the country. The March 2013 report from the U.S.

Department of Labor revealed the lowest labor force participation since 1979, so this is

hardly the time to disrupt hiring practices and discourage full time employment.

Would you be willing to work with members of Congress who want to change the ACA’s

definition of full-time employee to be consistent with the generally accepted 40 hours per

week? Would you be willing to work with other agencies involved to re-evaluate the

policy?

Answer: The employer responsibility provision only applies to firms with 50 or more full-time

equivalent employees. A 2009 Kaiser Health News study found that 95 percent of employers

with at least 50 workers already offer their employees health insurance. The Affordable Care

Act creates the Marketplace designed specifically to make it easier to provide health insurance to

employees of small businesses, including through a tax credit for eligible participating

employers. We have and will continue to work with the Department of Treasury as it

implements the rules for these policies.

Question 3

HHS recently announced that key components of the Small Business Health Options

Program will be delayed until 2015. It is my understanding that this program is an

essential part of the administration’s vision for the Health Insurance Exchanges

(“Exchanges”). The provision in question was designed to let employers give workers a set

amount of money to purchase insurance coverage in an online marketplace. The U.S.

Department of Health & Human Services (HHS) cited “operational challenges” in their

decision to delay this part of the Small Business Health Options Program.

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Does the delay in the Small Business Health Options Program indicate a broader issue with

the implementation timeline? Do you anticipate there being further delays?

Answer: Both the Marketplaces and the SHOP will be ready for open enrollment beginning

October 1, 2013. Small employers will then have access to a variety of plans offered through

SHOPs in all states. The Federal SHOP will provide qualified small employers with detailed

information on the qualified health plans (QHPs) that offer coverage in their area and will

provide the tools employers need to compare different QHPs and choose the QHP that best meets

their needs.

We have proposed a one-year transition in implementing “employee choice” function of the

federal SHOP: “Employee choice” means that qualified employers would be able to offer each

employee their own choice of health plans at the same level (“metal level”) of coverage. Under

the current proposal, the federally facilitated SHOP would enable employee choice for plan years

beginning on or after January 1, 2015. State-based SHOPs could choose to offer these functions

on or after January 1, 2014, and would be required to do starting January 1, 2015.

We proposed the transition after reviewing public comments. CMS concluded that continuing

the status quo of employers offering their employees a single QHP for the first year of SHOP

would provide employers with price transparency, stability, and an online comparison of benefits

and rates, maximize issuer participation in the SHOP in 2014, and build toward successful

implementation of the employee choice model in 2015.

Question 4

At last count, 26 states, including Ohio, will have federally-run Exchanges. An additional

seven states will run partnership Exchanges with the federal government. These

Exchanges are supposed to begin open enrollment on October 1st, 2013.

Given that the October 1st deadline for open enrollment is quickly approaching, will the

necessary Information Technology (IT) systems be ready to process the large amount of

data and information on day one? Is CMS planning to test these IT systems prior to open

enrollment to ensure that they will be able to handle such a large data volume?

Answer: Yes, CMS is engaged in a variety of tests, both internally and with external partners, to

ensure that IT systems are ready to handle the expected volume of data once open enrollment

begins. CMS is undertaking ‘Secure Communications’ and the ‘FEPS and Partner’ functional

testing with the IRS, beginning in October 2012. These tests have been successful in testing the

services between IRS and CMS.

The following federal agencies will begin similar testing in Spring 2013:

• Department of Homeland Security (DHS)

• Internal Revenue Service (IRS)

• Office of Personnel Management (OPM)

• Peace Corps

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• Social Security Administration (SSA)

• TRICARE Management Activity (TMA)

• Veterans Health Administration (VHA)

Several State Based Marketplaces and Federally Facilitated Marketplace states will begin

‘Secure Communications’ and ‘FEPS and Partner’ in the spring of 2013. All states will

participate in the ‘Regression and End to End’ Testing in August 2013. Plan issuers are

scheduled to begin testing plan management templates in the spring of 2013.

Together, internal and external testing will validate system functionality. Performance Stress

Testing will examine infrastructure capacity and scalability with the most active trading partners.

Security Testing will take place in the same manner as with all CMS systems. We have

dedicated significant resources and personnel to work with stakeholders in developing a robust

testing infrastructure that will allow for testing to occur once the system is operational.

Question 5

Providers are facing multiple compliance deadlines that are converging at once:

meaningful use, billing code changes, value based modifier, and HIPAA privacy provisions.

Many of these programs involve financial penalties for noncompliance. Providers are

being asked to undertake these efforts at the same time they are trying to move into new

payment and delivery models.

What concrete steps is CMS taking to educate and assist providers in meeting these

deadlines and complying with these programs?

Answer: We have worked to align the requirements of various programs to minimize

implementation and reporting burdens for providers. For example, we are better aligning the

Physician Quality Reporting System, the Electronic Health Records Incentive program and the

Physician Value-based Modifier with that goal that a physician will only have to report measures

once for all three programs. While I understand that addressing the requirements of each of these

programs can be time and resource intensive, I also believe that initiatives such as the ones you

have named are important to improving quality and efficiency in the health care delivery system.

We continue to think about how to minimize provider reporting burden and have been actively

engaged with the provider community on these issues.

Questions from Senator Brown

Question 1

Regarding Medicaid Expansion: CMS has been negotiating with individual states about

the details of coverage expansion. I know the Kasich Administration is in active

discussions with CMS and is working toward expansion that works for Ohio.

I understand some Governors are interested in using Medicaid expansion funds to

purchase private insurance. I am concerned that state flexibility in this area - while an

admirable goal - risks undermining the traditional benefits and protections afforded to

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Medicaid beneficiaries. What sort of flexibility is CMS allowing for states interested in this

alternative model and what is the Agency doing to ensure beneficiaries retain their rights

under the Medicaid program?

Are you confident CMS can work with states like Ohio?

If Medicaid is expanded in Ohio, how many people will be helped and what will be the cost

for the state’s if Medicaid expansion occurs?

Answer: CMS has recently released a set of Frequently Asked Questions (FAQs) regarding

state interest in the use of premium assistance. Under all premium assistance arrangements,

beneficiaries remain Medicaid beneficiaries and continue to be entitled to all benefits and cost-

sharing protections. States must have mechanisms in place to “wrap-around” private coverage to

the extent that benefits are less and cost sharing requirements are greater than those in Medicaid.

Some states have expressed interest in section 1115 demonstrations to provide premium

assistance. CMS has indicated that we will consider approving a limited number of premium

assistance demonstrations and would also consider states’ ideas on cost effectiveness related to

the Health Insurance Marketplaces and the expansion of Medicaid. CMS will consider only

those proposals that provide beneficiaries with a choice of at least two qualified health plans, that

make arrangements to provide any necessary wrap around benefits and cost sharing, that are

limited to individuals whose benefits are closely aligned with the benefits available on the

Marketplace and that end no later than December 31, 2016. As is our practice, CMS will include

in any demonstration approval, requirements for the state to closely monitor and report on the

demonstration’s progress. We have time limited the demonstrations to ensure they can inform

policy for the State Innovation Waivers that begin in 2017.

Additionally, CMS remains committed to addressing questions from and working with states,

like Ohio, as they consider the low-income adult Medicaid eligibility expansion. We continue to

believe that adopting the Medicaid expansion is beneficial for states. As you know, for the first

three years, the expansion is fully paid for by the federal government and will lead to expanded

coverage, improved health and lower rates of uncompensated care.

Question 2

Regarding Part D Preferred Provider Networks: I am concerned with the growing use of

preferred pharmacy networks in the Medicare Part D program, and have heard concerns

from small and medium-sized pharmacies in Ohio about being excluded from the

networks. It seems the insurance companies are inviting only a few big box and other large

pharmacies to participate. In the recently released Call Letter for the 2014 plan year, CMS

itself identified concerns with the use of preferred pharmacy networks in the Medicare

Part D program, particularly the potential for beneficiary disruption and travel costs,

especially in rural areas. CMS also indicated concern that the structure of some preferred

networks may actually be increasing costs for the Medicare program.

As the use of these networks has become more widespread, what actions does CMS plan to

take to ensure that the use of preferred pharmacy networks in the Medicare Part D

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program does not affect beneficiary access, lessen quality of care, or increase costs to the

Medicare program?

Additionally, the Office of the Inspector General (IOG) recently reported that gaps exist in

CMS’s oversight of the Medicare Plan Finder reporting requirements. How is CMS

ensuring that beneficiaries have access to all of the information they need about specific

plan benefits, including whether a plan uses a preferred pharmacy network and which

pharmacies are included in those networks?

Answer: Part D regulations that permit lower cost sharing at some “preferred” network

pharmacies also require that such cost sharing reductions must not increase CMS payments. In

order to ensure that Part D sponsors with preferred pharmacy networks are meeting this

requirement, we have begun to scrutinize Part D drug costs in PDPs with preferred networks, and

comparing these to costs in the non-preferred networks, as well as to costs in PDPs without

preferred networks. Our initial results suggest that for some plans, aggregate unit costs weighted

by utilization (for the top 25 brand and top 25 generic drugs) may be higher in preferred

networks than in non-preferred networks. Combined with lower cost sharing, we are concerned

that these higher unit costs may violate the requirement not to increase payments to such plans.

We have contacted the plan sponsors identified in our analysis to initiate the validation of our

findings.

As we indicated in the 2014 Call Letter issued April 1, we strongly believe that including any

pharmacy that can meet the terms and conditions of the preferred arrangements in the sponsor’s

preferred network is the best way to ensure that such networks promote price competition and

lower costs in the Part D program. Opening preferred pharmacy networks to any pharmacy that

can meet the network’s terms and conditions would also likely mitigate some beneficiary

disruption and travel costs, especially in rural areas. Mandating this policy for all Part D

sponsors would require rulemaking by CMS.

We are continuing to refine the Medicare Plan Finder to ensure that it provides the most accurate

information possible. As of April 2012, a beneficiary is now able to see drug price estimates that

reflect if the pharmacy selected is preferred or non-preferred for a given plan. If a pharmacy is

not in the selected plan’s network, the full price of the drug is shown. Concerns about the

Medicare Plan Finder being time-consuming may be a reflection of the increased number of

inputs needed to generate an accurate cost estimate. Having the Medicare Plan Finder prompt the

user for exact drug names, quantity and dosing regimen, Part D plan, subsidy eligibility, and

choice of pharmacy provides beneficiaries access to highly valuable information, to help select

the best coverage option and to anticipate medical expenses for the coming year. We welcome

your ideas to ensure that the Part D program remains strong.

Question 3

Investment in Pediatric Innovations

The Center for Medicare and Medicaid Innovation was created to support the development

and spread of delivery and payment reforms in Medicaid and Medicare that improve

quality of care and reduce health care costs. The Innovation Center has supported a

number of projects intended to innovate care for adults, but there has not been a similar

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investment in innovations for children. In fact, some of the funding opportunities offered

by the Innovation Center have excluded children.

How will you ensure CMS invests in delivery system and payment reforms that can

improve care for our nation’s children, especially those with complex medical needs?

Answer: We have a number of initiatives and programs that focus on improving the health and

healthcare outcomes for pediatric populations, including the Strong Start for Mothers and

Newborns initiative. The Strong Start initiative is an Innovation Center project focusing on

reducing early elective deliveries and reducing the rate of preterm births among high-risk women

in Medicaid and CHIP. Additionally, we have released the Initial Core Set of Child Health Care

Quality Indicators for Medicaid and CHIP, established for voluntary use by state Medicaid and

CHIP programs, which includes a range of children’s quality measures encompassing both

physical and mental health, including chronic conditions such as asthma and diabetes. CMS’

Pediatric Quality Measures Program and the Pediatric Electronic Health Record Format also

represent other initiatives the agency is pursing to help improve the health and care children

enrolled in our programs receive. Additionally, the Innovation Center is testing medical homes

for individuals with disabilities and complex health conditions and high-risk chronically ill

children.

As we do in all areas, we continue to look for opportunities to test promising models in the

Medicaid program and understand the importance of delivering better, more efficient care to

Medicaid beneficiaries. We are working closely with our colleagues at the Center for Medicaid

and CHIP services to coordinate our collective efforts to identify new opportunities.

Question 4

Regarding Primary Care Workforce: In many ways, the success of the ACA will depend

on an adequate supply of physicians, nurse practitioners, and nurses, especially primary

care providers who provide a usual source of care for most seniors.

How well do you think CMS is doing to ensure an adequate pipeline of primary care

providers?

Answer: We recognize the need to invest in the workforce to improve the health care system.

New payment reforms, like Accountable Care Organizations and other models to promote

coordination can play a role in addressing a shortage of physicians by encouraging a team

approach to medicine. By using the skills of other providers, like nurse practitioners and

pharmacists, this approach allows physician to more efficiently use their time. In addition, CMS

has implemented the Affordable Care Act’s 10 percent payment increase to primary care

physicians. And the Innovation Challenge Awards are testing ideas to strengthen the primary

care workforce.

In 2012, CMS revised the hospital conditions of participation to broaden the concept of the

medical staff and allow hospitals the flexibility to include other practitioners as eligible

candidates for the medical staff in accordance with state law. Non-physician practitioners are

capable of handling many common patient complaints, initial patient work-up and follow-up,

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patient education and counseling, and other specific aspects of patient care. Physicians, as

leaders of these teams due to their more extensive training and expertise, are then able to more

fully turn their attention to more complicated patient problems. In this way, non-physician

medical staff members allow physicians to more efficiently and effectively manage their time so

that these physician leaders can focus on more medically complex patients.

CMS has also implemented the Affordable Care Act’s Graduate Nurse Education Demonstration

to support hospitals for the cost of providing clinical training to advanced practice registered

nurse students. Five hospitals were selected, including the Hospital of the University of

Pennsylvania, Duke University Hospital, and Memorial-Hermann Texas Medical Center

Hospital.

Finally, CMS is working closely with our partner agencies across HHS, including the Health

Resources and Services Administration (HRSA), to ensure an adequate pipeline of primary care

providers is supported.

What are you doing to enhance training opportunities in community outpatient settings?

Answer: CMS is undertaking a number of initiatives to enhance community outpatient care

and, as a result, the training opportunities in those settings. The Affordable Care Act amended

the Social Security Act to allow any time spent by residents training in a nonprovider setting to

count toward direct graduate medical education (GME) and indirect medical education (IME)

costs if the hospital incurs the costs of residents’ salaries and fringe benefits. This change was

effective for cost reporting periods beginning on or after July 1, 2010, for direct GME, and for

discharges occurring on or after July 1, 2010, for IME and was finalized in the Calendar Year

2011 Hospital Outpatient Prospective Payment System final rule. This change was expected to

lead to an increased number of residents training in nonprovider sites such as community-based

settings.

The Health Care Innovation Awards are funding new models of payment and service delivery.

The Innovation Awards recognized the need for an appropriate trained workforce to support new

models of payment and service delivery. Applicants were encouraged to propose models that

included a significant opportunity to develop and deploy health care workers in innovative ways,

which can include community outpatient care. For example, in Michigan, the Michigan Public

Health Institute received an award to integrate community health workers into primary care

teams in order to coach patients on self-management and encourage regular primary care visits. Additional efforts to enhance training opportunities in community outpatient settings are

supported by our sister agency, HRSA.

Question 5

Regarding Pediatric Dental Care: I am concerned about the affordability of the pediatric

oral health benefit. As you know, it is specifically listed as an essential health benefit and a

part of the comprehensive set of pediatric services promised to families entering any

exchange. However, the Center for Consumer Information and Insurance Oversight

(CCIIO) has interpreted the “allow-ability” of stand-alone dental plans inside the exchange

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to mean that families that opt for or are forced to choose a stand-alone dental plan will be

faced with out of pocket limits above and beyond those established in the underlying law.

Can you explain how you will ensure that pediatric dental care is reasonably affordable for

average Americans?

Answer: CMS has taken steps to implement the provisions regarding the pediatric dental

essential health benefit in a manner that is consistent with the statute and provides as many

consumer protections as possible. Essential health benefit requirements mandate that certain

issuers offer certain benefits, but do not require individuals or families to obtain coverage for a

particular benefit. As you note, the statute is different with respect to issuers inside

Marketplaces. While the Affordable Care Act requires issuers offering non-grandfathered

coverage in the individual and small group markets to offer the essential health benefits. Section

1302 of the Affordable Care Act also allowed issuers in an Marketplace to opt not to offer

pediatric dental coverage if there is a stand-alone dental plan offering the pediatric dental

essential benefit operating in that Marketplace.

There are several ways that the Affordable Care Act and the implementing regulations help with

the affordability of pediatric dental essential health benefits. Specifically with respect to stand-

alone dental plans, individuals may use premium tax credits to purchase a stand-alone dental

plan. Our rules provide that if a family is enrolled in a QHP and a stand-alone dental plan, the

premium tax credit is first applied to the portion of the premium for the QHP related to the

essential health benefits, and any remaining amount is then applied to the portion of the premium

for the dental plan related to essential health benefits.

In addition, the final essential health benefits rule requires dental plan issuers to offer plans at

either a low (70%) or high (85%) actuarial value. Actuarial value is a measure of expected plan

spending across a standard population. This means that every stand-alone dental plan purchased

in an Exchange will cover, on average, 70% or 85% of costs that individuals could be expected

to incur in a year for pediatric essential dental benefits.

Finally, as you note, the final essential health benefits rule established a separate annual

limitation on cost-sharing for stand-alone dental plans provided that such limitation was

reasonable, as defined by a Marketplace. For coverage year 2014, CMS has interpreted a

reasonable limit to be $700 for a plan with one child enrollee or $1,400 for a plan with two or

more child enrollees. It is important to remember that these annual limits on cost-sharing are

catastrophic limits beyond which all pediatric essential health benefits would be covered in full.

Question 6

Regarding Small Business: I have heard from Ohio business owners concern about their

responsibilities under the Affordable Care Act. Some are looking at ways around

providing insurance, such as cutting workforce hours or their number of employees.

Businesses are also overwhelmed with trying to determine whether their health insurance

plans are both affordable (cannot exceed 9.8% of employee’s income) and provide

minimum value. I have also heard that the tax incentives for small business are being

under-utilized.

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What are CMS and the IRS doing to help business owners make good decisions about

employment and health insurance that will fit with the spirit of the ACA?

Answer: The Small Business Health Options Program (SHOP) Marketplaces will help small

businesses provide affordable, quality coverage for their employees. Eligible small businesses

will be able to access tax credits and obtain access to information about coverage options

through the SHOP. By pooling employers together, reducing transaction costs, and increasing

transparency and competition, the Health Insurance Marketplace for individuals and small

employer groups will be more efficient and competitive.

The Affordable Care Act creates a Marketplace designed specifically to make it easier to provide

health insurance to their employees, including through a tax credit for eligible participating

employers who obtain coverage thorough the Marketplace.

CMS has been developing SHOP-focused training and materials to help small businesses

understand the Affordable Care Act and the opportunities it presents to them. And we have a

strong partner in the Small Business Administration, which has created its own education

sessions for small businesses that they will start offering the spring. We also expect agents and

brokers to play a significant role in working with the small business community.

To what degree do you think CMS is meeting goals for including small business into the

process of working toward insuring workers?

Answer: CMS has worked with our regional offices and the Small Business Administration to

provide updates to small businesses on recent policies and regulations. Starting in 2014, small

businesses will be able to purchase private health insurance for their employees through the

Marketplace. CMS has also already released the draft single streamlined application for small

businesses and has begun engaging small business to hear their input and communicate how the

Marketplace will work and when it will be ready. These discussions, which are led by CMS

regional offices, are the start of ongoing conversations with all stakeholders including the small

business community.

What in particular is CMS doing to help small businesses make necessary adjustments and

make full use of tax incentives?

Answer: CMS has been developing SHOP-focused training and materials to help small

businesses understand the Affordable Care Act and the opportunities it presents to them. We

also have a strong partner in the Small Business Administration, which has created its own

education sessions for small businesses that they will start offering this spring. We also expect

agents and brokers to play a large role in working with the small business community.

Question 7

Regarding Health Care Spending and Medicare Solvency: Earlier this year, report after

report found that national health spending had slowed and created a smaller difference

between the rate of health care growth and the rate of growth in the whole economy. Some

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of the slowdown could be attributed to events before the Affordable Care Act (ACA) was in

place and some to the transformation the ACA is having on delivery system reforms and

attitudes.

What effect is this slowdown having on Medicare’s long-term solvency? Is CMS working

to predict whether – at least for Medicare and Medicaid – the slowdown is a recession

driven event or if this new trajectory will remain, at least for a time?

Answer: Thanks partly to reforms in the Affordable Care Act—including anti-fraud measures

and new incentives for doctors to eliminate duplication and waste—Medicare spending per

beneficiary grew at a historically low rate of 0.4 percent in 2012. This slowdown reflects, in

part, the successful implementation of the Affordable Care Act's provisions that strengthen the

Medicare program. These statistics show that the Affordable Care Act has helped in part to set

Medicare on a more sustainable path to keep its commitment to seniors and persons with

disabilities today and well into the future. The President’s 2014 Budget request would add 4

years to the solvency of the Medicare Trust Fund. The success in reducing the rate of spending

growth has been achieved without any reduction in guaranteed benefits for beneficiaries. To the

contrary, Medicare beneficiaries have gained access to additional benefits, such as increased

coverage of preventive services and lower cost-sharing for prescription drugs.

The economic recession may have contributed to the 2010 to 2012 decrease in per beneficiary

spending growth as consumers used less care due to its cost. However, as almost all Medicare

beneficiaries have supplemental coverage and thus face relatively low out-of-pocket costs, it

seems unlikely that consumer behavior alone is responsible for the slow growth in Medicare

spending.

Question 8

Regarding Observation Status: Senator Schumer mentioned my legislation, the Improving

Access to Medicare Coverage Act, during the hearing and I would like your thoughts on

addressing this problem. Too many Ohio seniors have written to me about high out-of-

pocket costs they are enduring because, while they required skilled nursing facility (SNF)

care after a hospitalization, Medicare will not pay for it.

Aside from legislation, what authority does CMS have to work with seniors to get these

services covered? Additionally, has CMS been looking into why hospitals are increasingly

leaving people in medical limbo for several hours and even days?

Answer: We are also concerned about the recent increases in the length of time that Medicare

beneficiaries spend as an outpatient receiving observation services. This can affect beneficiaries’

financial liability during the hospital stay and their ability to meet the 3-day qualifying inpatient

hospital stay requirement for coverage of skilled nursing facility services. We solicited

comments from stakeholders on a rule last year that would address this issue.

We heard from stakeholders that hospitals appear to be responding to the financial risk

associated with admitting Medicare beneficiaries for inpatient stays that may later be denied

upon contractor review by electing to treat beneficiaries as outpatients receiving observation

services, often for longer periods of time, rather than admitting beneficiaries as inpatients. In

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addition, hospitals could only rebill under Part B for a limited set of services they furnished

during these inpatient stays. As a step to address this concern, we recently released a Ruling and

proposed rule that would allow hospitals to bill for additional services under Medicare Part B

when a Part A inpatient claim is denied by our contractors.

We also received comments on the 3-day qualifying inpatient stay requirement. Many

commenters indicated that the statutory 3-day qualifying inpatient stay requirement is obsolete,

given the advances in medical care, the trend towards reduced length of stay, and the migration

of services from the inpatient to outpatient setting. Some of these commenters recommended

that the 3-day inpatient stay requirement be replaced with clinically meaningful criteria that are

not time based or based on patient status. Other commenters expressed their support for

legislation that would allow time in observation to be counted as inpatient time for purposes of

SNF qualification. In addition, some commenters recommended waiving the 3-day rule for

certain diagnoses that benefit from short inpatient stays and speedy access to post-acute

rehabilitative services. We will consider these comments for possible future rulemaking.

However, we cannot change the statutory requirements for Medicare coverage of skilled nursing

facility services. Section 1861(i) of the Social Security Act defines post-hospital skilled nursing

facility services as services furnished to a beneficiary after transfer from a hospital in which the

beneficiary was an inpatient for not less than 3 consecutive days before discharge from the

hospital. The Social Security Act is explicit on the requirements for coverage of skilled nursing

facility services that the beneficiary be an inpatient prior to transfer from a hospital. By contrast,

observation stay services are furnished on an outpatient basis and, therefore, do not meet the

statutory criteria for the 3-day qualifying hospital stay requirement for coverage of skilled

nursing facility services.

Question 9

Informing Seniors of Their New Benefits: Since 2010, seniors have been able to have

annual wellness check-ups and preventive screenings. Over a million seniors have taken

advantage of at least one screening, but fewer have had their annual check-up. We all know

an ounce of prevention is worth a pound of cure. Encouraging prevention will improve the

health of seniors and save Medicare money.

How is CMS ensuring that seniors understand and take advantage of the new benefits?

Additionally, do you have a demographic breakdown of who is and who is not utilizing the

screenings? Have you been able to calculate the amount of cost savings provided by these

preventive screenings?

Answer: Medicare covers a wide range of screening and preventive benefits, including services

that have been covered by statute for many years (for example, influenza and pneumococcal

vaccinations, Pap tests, and screening mammography), and services added through evidence-

based National Coverage Determinations under authority granted by the Medicare Improvements

for Patients and Providers Act of 2008 (for example, tobacco cessation counseling, and intensive

behavioral therapy for cardiovascular disease). In addition, the Affordable Care Act established

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coverage of an Annual Wellness Visit beginning in 2011 (building on the one-time “Welcome to

Medicare Visit” for new beneficiaries).

Prior to 2011, people with Medicare had to pay cost-sharing for many preventive services.

However, under the Affordable Care Act, many preventive services are now offered free of

charge to beneficiaries, with no deductible or co-pay, so that cost is no longer a barrier for

seniors who want to stay healthy and treat problems early.

During 2012, an estimated 34.1 million people with Original Medicare or Medicare Advantage

received one or more preventive benefits free of charge. Over 3 million people with Original

Medicare took advantage of the new Annual Wellness Visit in 2012. In February 2013, CMS

issued a report on use of Medicare’s preventive services in 2011 and 2012, including a state-by-

state breakdown on 2012 utilization in Original Medicare.

CMS has undertaken a range of initiatives to educate providers and beneficiaries about the

importance of prevention and Medicare coverage of preventive services, including the Annual

Wellness Visit, and will continue to work toward increasing awareness and use of these

important benefits.

Questions from Senator Cornyn

Question 1

CMS has had three years to implement the SHOP program that would allow employees of

small businesses to shop for insurance plans. Why is this one-year delay necessary? How

long has CMS known that it would not be prepared to implement the SHOP program on

time? Can we expect other PPACA implementation delays?

Answer: The SHOP will be ready for open enrollment in October, 2013. The Federal SHOP

will provide small qualified employers with detailed information on the qualified health plans

(QHPs) that offer coverage in their area and will provide the tools employers need to compare

different QHPs and choose the QHP that best meets their needs.

We have proposed a one-year transition in implementing the “employee choice” function of the

federal SHOP.” “Employee choice” means that qualified employers would be able to offer each

employee their own choice of health plans at the same level (“metal level”) of coverage. Under

the current proposal, the federally facilitated SHOP would enable employee choice for plan years

beginning on or after January 1, 2015. State-based SHOPs could choose to offer these functions

on or after January 1, 2015, and would be required to do starting January 1, 2015.

We proposed the transition after reviewing public comments. CMS concluded that continuing

allowing employers to continue offering their employees a single QHP for the first year of SHOP

would provide employers with price transparency, stability, and an online comparison of benefits

and rates, maximize issuer participation in the SHOP in 2014, and build toward successful

implementation of the employee choice model in the 2015 small group market.

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Question 2

A recent article published in Contingencies, a magazine of the American Academy of

Actuaries, found that premiums for individuals in the nongroup market aged 21 to 29 who

are not eligible for premium assistance will increase by 42 percent. For those aged 30 to 39,

premiums are expected to increase by 31 percent. Administration officials have noted that

the PPACA allows individuals under 30 to purchase a catastrophic plan option. However,

the actuaries are predicting large increases for those over 30 and not eligible to purchase

catastrophic plan options. In addition, Administration officials often point to the fact that

the premium tax credits will offset these premium increases. However, actuaries note that

adults up to 44 with incomes above 300 percent of the FPL (approximately $33,510) will see

premium increases, even taking into account premium assistance. For those below 30,

individuals at about 225 percent of FPL (approximately $25,000) can expect to see

premium increases, even after taking into account premium assistance. Do you believe that

premiums will rise as a result of the PPACA? Are you concerned about these premium

increases?

Answer:

The individual and small group markets – the markets that much of the Affordable Care Act is

designed to improve in particular -- are broken. People are currently locked out of these markets

because of their pre-existing conditions, or if they are able to buy insurance, they may find out

their coverage will not extend to the care they need when they get sick. Young women who

currently pay for their own insurance plan may discover that, simply on account of their gender,

they are charged 50 percent more than young men are for the same plan. This fall, people are

going to be able to buy comprehensive insurance without discrimination based on gender or pre-

existing conditions. Also, low- and middle-income people may qualify for premium tax credits

to help them buy insurance.

Starting in 2014, people will be able to choose their health plans based on the actuarial value

they think fits their needs and their budget. Actuarial value means the percentage paid by a

health plan of the total allowed costs of benefits. For example, if a plan has an actuarial value of

70 percent, the average consumer would be responsible for 30 percent of the costs of the

essential health benefits the plan covers. Plans will range from 60 to 90 percent of actuarial

value.

Additionally, the Marketplace will increase competition between issuers on the individual

market. With transparent prices and standard tier benefits, CBO projects a 7 percent to 10

percent decrease in premiums.

Also, young adults and certain other people for whom coverage would otherwise be unaffordable

may enroll in catastrophic plans, which have lower premiums, protect against high out-of-pocket

costs, and cover recommended preventive services without cost sharing. Young people under

the age of 26 are also generally allowed to stay on their parents’ insurance, helping make

insurance more affordable for that group.

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There are also many provisions in the law to slow health care cost growth and create competition

in the insurance marketplace. For example, the reinsurance and risk adjustment programs will

help stabilize premiums.

Question 3

Will the Pre-Existing Condition Insurance Program (PCIP) program run out of its $5

billion appropriation before 2014? What is CMS doing to ensure that funds remain

available for individuals enrolled in this program? How is CMS planning to communicate

information to these individuals about their transition out of the PCIP program?

Answer: CMS is doing everything it can to ensure that the limited amount of funding

appropriated to the program by Congress is available to continue providing covered services to

enrollees until 2014. CMS is aggressively managing costs in the federal PCIP program and has

taken a variety of steps to ensure that the funds provided by the Affordable Care Act are applied

efficiently in funding patient care and program administration. These include a change in

provider networks used by the federally-administered PCIP, reducing both its negotiated and out-

of-network payment rate for providers; negotiation of additional discounts on reimbursement

rates with targeted hospitals that were treating a disproportionate number of PCIP enrollees;

limiting the specialty drug benefit to provide coverage only if the specialty drug is dispensed by

an in-network pharmacy and providers that were most cost effective, and; consolidation of three

benefit plan options into one, increasing the maximum out-of-pocket limit from $4,000 to $6,250

for in-network services.

Open enrollment for plans in the new Marketplace begins October 1, 2013, for coverage

beginning January 1, 2014, which generally coincides with the statutory end of the PCIP

program. To help effectively transition PCIP members who wish to enroll in a qualified health

plan offered through the new Marketplaces, we are working with our PCIP contractors to ensure

enrollees in both state-based PCIPs and the federally-administered program receive information

about the new Marketplaces. Specifically, we are developing three notices that will be sent to

enrollees in federally-administered PCIP over the next several months explaining that PCIP

coverage ends after December 31, 2013, describing the Marketplaces, how to enroll beginning in

October, and where enrollees can get assistance with enrolling in coverage. Additionally, we

have directed our contractors to update their PCIP websites with transition content, train

customer service representatives, and provide adequate staffing at their call centers during the

last quarter of calendar year 2013 and the first quarter of calendar year 2014 to handle

anticipated calls from transitioning enrollees.

Question 4

The health reform law specifically states that the Independent Payment Advisory Board’s

(IPAB’s) recommendations may not:

• Raise revenues;

• Raise Medicare beneficiary premiums;

• Increase beneficiary cost-sharing (including deductibles, coinsurance, and

copayments), or;

• Modify eligibility criteria.

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What types of proposals do you believe the IPAB could propose? The health reform law

also specifically prohibits the IPAB from making recommendations that would “ration

health care” or “otherwise restrict benefits.” Would you agree that provider payment

rates can be cut so low that this ultimately leads to rationing of care?

Answer: The Independent Payment Advisory Board (IPAB) builds on the commitment we have

made to our seniors’ health. The Affordable Care Act provides for consultation between the

President and Congressional leadership in appointing members of the Board, and appointments

are subject to the advice and consent of the Senate. The Board’s primary responsibility will be to

recommend certain improvements to Medicare. Recommendations of the IPAB will focus on

ways to improve health care while lowering the growth in Medicare spending. For example, the

Board could recommend approaches that would build on and strengthen the initiatives mentioned

above, from reducing medical errors, to strengthening prevention and improving care

coordination, or targeting waste and fraud.

At the same time, the law contains important limitations on what the Board can recommend. The

statute is very clear: the IPAB cannot make recommendations that ration care, raise beneficiary

premiums or cost-sharing, reduce benefits, or change eligibility for Medicare. The IPAB cannot

eliminate benefits or decide what care Medicare beneficiaries are entitled to receive.

Considering the requirements and limitations on recommendations from the Board, we expect it

will focus on ways to find efficiencies in the payment systems and align provider incentives to

drive down costs without affecting our seniors’ access to the care and treatment they need. The

Board’s recommendations are will not take effect unless Congress fails to act to keep Medicare

cost growth in check.

Question 5

In January 2012, the CBO released an issue brief on Medicare demonstration projects that

finds:

The evaluations show that most programs have not reduced Medicare spending: In nearly

every program involving disease management and care coordination, spending was either

unchanged or increased relative to the spending that would have occurred in the absence of

the program, when the fees paid to the participating organizations were considered.

Of the ten major demonstrations reviewed, CBO stated: “CBO finds that most programs

tested in those demonstrations have not reduced federal spending on Medicare.”

Given CBO’s findings regarding the lack of cost savings produced by demonstrations, what

is different about the demonstrations conducted at CMMI? How can members of Congress

be assured that the $10 billion appropriated to the CMMI in the PPACA is not wasted? Is

CMS prepared to expand successful demonstrations quickly?

Answer: The United States has one of the best and most innovative health care systems in the

world. We are a global leader in developing new treatments, drugs and procedures to help heal

patients. At the same time, we know that we need to do more to help ensure every patient gets

the very best care – and that we are spending our health care dollars wisely. This CBO report

outlined how difficult this challenge is. The same report recommended that future efforts focus

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on collecting better data, targeting resources at the patients who need it most, and encouraging

care providers to work together. The Innovation Center is charged with engaging doctors,

hospitals, and other providers that want to try new approaches to keeping their patients healthy

and out of the hospital. Even before the CBO was released, the Innovation Center was putting

some of these lessons and recommendations into practice.

Some examples of how the Innovation Center has already adopted some of CBO’s

recommendations:

CBO Recommendation: Gather timely data on the use of care, especially hospital

admissions.

o Innovation Center action: Health systems participating in the Pioneer ACO and

ACO Shared Savings models will receive updates on care received by their

patients within a few weeks of when it occurred, down from 6 months or more

in previous demonstrations.

CBO Recommendation: Focus on transitions in care settings.

o Innovation Center action: The Community-Based Care Transitions Program

will invest in organizations such as Area Agencies on Aging that help seniors as

they leave the hospital, including through home visits. In addition, the

Demonstration to Reduce Hospitalizations of Nursing Facility Residents will

invest $134 million in providing additional care and supports to help reduce

preventable hospitalizations among nursing home residents.

CBO Recommendation: Use team-based care.

o Innovation Center action: The Comprehensive Primary Care Initiative provides

new supports from both Medicare and private health insurers to make sure that

participating primary care practices have robust care teams – which could

include nurses, pharmacists, and dieticians – available 7 days a week to

coordinate care and avert visits to the emergency room.

CBO Recommendation: Target interventions toward high-risk enrollees.

o Innovation Center action: Along with the Medicare-Medicaid Coordination

Office, the Innovation Center is empowering states to invest in new models

targeted toward beneficiaries that are eligible for both Medicare and Medicaid,

a group of beneficiaries at particularly high risk for having multiple chronic

health conditions and high health care costs.

CBO Recommendation: Limit the costs of intervention.

o Innovation Center action: The Innovation Center is testing several new payment

models, such as the Pioneer ACO Model and the Bundled Payments for Care

Improvement, with no upfront payments to participating doctors and hospitals.

Rather, these groups will be rewarded once their innovative approach is proven

to have reduced costs and kept patients healthier.

The Innovation Center is committed to rapid cycle evaluation. Instead of the usual process of

waiting until the testing and evaluation are completed, the Innovation Center is monitoring the

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outcomes of the initiative as it is ongoing. We are hopeful to identify early indicators of success

or failure and make any necessary modifications to the model as may be necessary. Once testing

has begun, the Affordable Care Act requires the Innovation Center to terminate or modify the

model, unless the Secretary determines that the model is expected to improve the quality of care

without increasing spending; reduce spending without reducing the quality of care; or improve

the quality of care and reduce spending. The statute is clear that a model must reduce spending

without reducing the quality of care, or improve quality of care without increasing spending

(among other requirements) in order to be expanded by the Secretary through rulemaking.

Question 6

Members of this Committee have heard significant concern from the kidney care

community that patient access to quality dialysis care could be disrupted if the payment

adjustment to the Medicare ESRD bundle contained in the fiscal cliff bill is not properly

designed and implemented. As you know, these patients are some of the most vulnerable—

approximately 87 percent of patients are Medicare beneficiaries and nearly half are dual

eligibles. Do I have your commitment that you will implement the bundle adjustment

fairly to ensure that reimbursement remains adequate to maintain patient access to high

quality care?

Answer: We agree with the importance of appropriate payments to ensure access to dialysis

treatment for ESRD beneficiaries. Section 632 of the American Taxpayers Relief Act of 2012

requires that the ESRD prospective payment system (PPS) rate be reduced beginning in 2014 to

reflect the change in utilization of drugs and biologicals from 2007 with 2012. Before we make

any changes to the ESRD PPS rate, we will carefully analyze the data on utilization and include

the proposed payment change based on the data in a proposed rule for public comment. We will

review comments taking into consideration issues raised by stakeholders to ensure that

beneficiaries continue to have access to the medications they need before we make a final

decision on the payment change. To date, the bundled payment system has not comprised access

or availability of care. Any further changes will continue strong access and improved quality of

care.

Question 7

Recent changes to the statute governing Medicare quality improvement organizations

(QIOs) give CMS broad authority to modify aspects of the program, including the

geographic scope of the QIO jurisdictions? What are the agency’s plans for the future of

the QIOs with regard to the geographic scope of the program?

Answer: CMS is currently in the process of evaluating how to structure the QIO contracts in the

11th

Statement of Work (SOW) using the flexibility and new authority provided in the Trade

Adjustment Assistance Extension Act of 2011. We plan to capitalize on the strengths and

institutional knowledge of the QIO program that have been built throughout the years.

Under the 11th

SOW that we are developing, we will ensure that no locality will lose access to a

Medicare QIO. CMS is still determining precisely how many QIO contracts will be awarded;

however, CMS will require that every QIO—regardless of the size of its jurisdiction—reach

providers and beneficiaries at the local level. We also understand the importance of involvement

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of physicians in the peer review process. CMS’ best success in transforming health care is to

drive quality improvement at the local level.

Question 8

Last year, former Administrators of CMS met with the Senate Finance Committee to

discuss alternatives to the sustainable growth rate (SGR). According to testimony from

these former Administrators (from both parties), all agreed that CMS consider moving the

physician rate setting function within CMS or create an independent physician Advisory

Board that would assign the relative value for physician services. What is your opinion on

this?

Answer: The rate-setting process for the Physician Fee Schedule (PFS) is complex. Each year,

through notice and comment rulemaking, we develop and propose appropriate adjustments to

relative value units (RVUs). We consider and respond to all timely public comments, including

those from medical specialty societies, as well as from a committee comprised of physicians

representing various specialties that was formed to review codes and estimate the resources

involved with furnishing a service (such as clinical staff time, supplies, and equipment used in

the provision of these services). We consider recommendations made by this committee as well

as from MedPAC and other stakeholders in establishing the final relative values each year. In

recent years, CMS has focused its work on identifying misvalued codes in order to eliminate

mispricing in the fee schedule. We plan to continue that work and welcome input regarding how

to improve the process.

Question 9

Recent press articles have raised concern that oncology clinics may have to close their

doors or sell their practices to hospitals given concerns about inadequate Medicare

reimbursements for cancer drugs due to sequestration. Have you met with stakeholders on

this issue, and is CMS monitoring the potential consolidation and closures that are

predicted?

Answer: We share your concern about the potential adverse impacts of the payment cuts

mandated by sequestration, both with regard to Medicare payments, and more broadly across all

government programs. That is why the Administration has indicated that we stand ready to work

with Congress on balanced approaches to replace sequestration to avoid its adverse impacts.

CMS is committed to preserving Medicare beneficiaries’ access to quality health care. We will

continue to monitor the impact of provider payment cuts mandated under the Budget Control Act

to assess their impact on Medicare beneficiaries and we are happy to share our results.

Question 10

While you have been Acting Administrator, what work has CMS engaged in to advance

SGR reform? Will you commit to making SGR reform a priority if you are confirmed as

Administrator?

Answer: The current SGR system creates a level of uncertainty for the physician community,

for our beneficiaries, and for the health plan payment systems that are tied to the physician

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payment system. It can be challenging to manage the programs with an ever-present risk of

significant cuts. I am committed to working with Congress to reform Medicare physician

payments to provide predictable payments that incentivize quality and efficiency in a fiscally

responsible way. The Administration supports replacing the SGR with a period of payment

stability lasting several years to allow time for the continued development of scalable

accountable payment models. Such models would encourage care coordination, reward

practitioners who provide high quality, efficient care, and hold practitioners accountable through

the application of financial risk for consistently providing low quality care at excessive costs.

To help inform future reforms to physician payment systems, CMS is testing a variety of models

through the Innovation Center that improve care quality, coordinate care, and reduce the total

cost of care. For example, the Comprehensive Primary Care Initiative is a multi-payer initiative

where CMS pays primary care providers monthly care management fees for comprehensive care

management on top of their regular Medicare Fee-for Service payment. After two years, CMS

offers the providers the chance to share in any savings they generate. Other payers, often

including Medicaid, are also providing enhanced payment for primary care services.

Another model is the accountable care organization (ACO). In addition to the Medicare Shared

Savings Program, we are testing the Pioneer ACO model and the Advance Payment ACO model.

ACOs involve groups of doctors, hospitals, and providers that accept accountability for

providing high quality coordinated care to Medicare beneficiaries. ACOs are eligible for shared

savings and may be subject to losses.

Finally, the Bundled Payments for Care Improvement initiative is comprised of four broadly

defined models of care, which link payments for multiple services beneficiaries receive during an

episode of care. We think episode-based payment has a lot of potential to transform the health

care delivery system.

Question 11

You have expressed your commitment to addressing behavioral health issues as

Administrator of CMS. The number of tragic incidences involving people with serious

mental illness – both as victims as well as perpetrators - seems to be escalating in number

and magnitude over the last several years. What efforts are underway to ensure that

Medicare and Medicaid beneficiaries with mental illness are receiving appropriate care

and have access to adequate treatment options?

Answer: CMS agrees that behavioral health issues are a serious concern, particularly in light of

the number of tragic incidences involving people with serious mental illness. CMS programs

help to ensure that people on Medicare and Medicaid have access to needed mental health

services and other treatment options. Under the Medicaid program, the Early and Periodic

Screening, Diagnostic and Treatment (EPSDT) benefit ensures that the health care needs of

children and youth are addressed to maximize their growth and development, including

prevention and early identification of mental health and substance use conditions. And for

Medicare beneficiaries, Part B covered preventive and screening services cover depression

screenings. These are just some of the ways the Medicare and Medicaid programs work to ensure

beneficiaries’ access to preventive care to more effectively identify and manage mental illness.

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Question 12

In Texas, 9.7 percent of adults have been diagnosed with diabetes. (The U.S. average is 9.3

percent.) For minority communities in Texas, the numbers are even worse. Eleven percent

of Hispanics and 16.5 percent of African Americans have been diagnosed with diabetes. In

what ways is CMS working to address this health crisis and do you believe CMS has a role

to play in ensuring thorough, yet timely review of new technologies and treatment options

that could improve the quality of care for diabetes patients?

Answer: CMS is working to address diabetes and other chronic conditions in a number of ways,

including through Medicare’s annual wellness visit, which provides beneficiaries with

personalized prevention plan services at no cost. Such visits are crucial to the early detection and

successful management of chronic conditions like diabetes. For beneficiaries’ ongoing care,

accountable care organizations (ACOs) are a CMS initiative to better coordinate care, which is

particularly important for patients with multiple chronic conditions. ACOs are designed to

promote accountability for a patient population, coordinate items and services, and encourage

investment in infrastructure and redesigned care processes for high quality and efficient service

delivery. Coordinated care helps ensure that patients, especially the chronically ill, get the right

care at the right time, with the goal of avoiding unnecessary duplication of services and

preventing medical errors. ACOs have the ability to redesign care to address their unique

circumstances, patient populations and local community needs. Many ACOs have indicated that

they plan to focus on chronic disease, patients transitioning care and high risk patient

populations.

This is also addressed through the Medicaid Incentives for the Prevention of Chronic Diseases

(MIPCD) model, which is testing the effectiveness of providing incentives directly to Medicaid

beneficiaries of all ages who participate in MIPCD prevention programs, and change their health

risks and outcomes by adopting healthy behaviors. A total of ten states are participating in this

model.

Question 13

You have indicated that CMS is now moving into a third phase of anti-fraud measures (i.e.,

use of moratorium authority). This authority would allow you to impose temporary

moratoria on problem providers applying for Medicare participation numbers. Thus far,

this authority has not been exercised. For instance, in 2010, 65 new provider numbers were

established for new home health agencies in Miami-Dade county alone. Can you (1)

explain how and why this happened; and (2) explain how, as Administrator of CMS, you

would exercise your moratorium authority and when you will begin using it.

Answer: Currently all providers, including home health agencies, can enroll in Medicare so

long as they meet our current eligibility application processes and enrollment standards.

The use of an enrollment moratorium is a significant and powerful tool Congress provided us to

fight fraud in Medicare and Medicaid under the Affordable Care Act. I take the authority to

impose the use of this tool very seriously. We are closely evaluating the use of the enrollment

moratorium authority in areas at high risk of fraud.

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Since passage of the Affordable Care Act, CMS has implemented a comprehensive anti-fraud

strategy that is using increased and enhanced provider enrollment checks, the ability to stop

payments during an investigation of fraud, new requirements on ordering and referring high risk

services, and a new predictive analytic claims screening system (using additional resources

provided in the Small Business Jobs Act of 2010).

While CMS has yet to impose a moratorium, I have directed the agency to take implementing

steps to impose one if warranted. In February 2011, CMS issued final regulations setting out the

criteria to be used when imposing a temporary enrollment moratorium on providers and/or

suppliers under the Affordable Care Act. (See 75 Fed. Reg. 5862, Feb. 2, 2011). Because the

moratoria authority extends beyond Medicare to also Medicaid, the agency is currently

evaluating the impact moratoria would have on access to providers and suppliers in both

programs. While high utilization and costs may be a factor in determining if there is a

“significant potential for fraud, waste, or abuse with respect to a particular provider or supplier

type or particular geographic area,” it is not the deciding factor in whether a moratorium is

warranted. We want to carefully strike a balance between combatting fraud in high-risk areas and

making sure beneficiaries will not be adversely impacted by a moratoria. As detailed in our

regulations we would announce any moratorium in the Federal Register explaining our

underlying rationale for taking such action in the areas in which it would apply.

Question 14

The Food & Drug Administration reported this year that there are 200 fewer

mammography facilities and nearly 1,000 fewer mammography scanners available to

American women than in 2007, when several major Medicare imaging payment reductions

were implemented. Centers for Disease Control and Prevention data also indicates that

mammography screening rates have fallen slightly over the 2003 through 2010 period. In

light of the critical role that early detection can play in improving clinical outcomes, is

CMS monitoring the impact that Medicare payment rate cuts may be having on

beneficiary access to important diagnostic imaging services, like mammography?

Answer: Medicare covers screening mammograms to check for breast cancer once every 12

months for all women with Medicare 40 and older. Beneficiaries pay nothing for the test if the

doctor or other qualified health care provider accepts assignment.

We believe access to these preventive services are important and are monitoring access to care.

Question 15

Is CMS monitoring potential health care consolidation that may result from policies set

forward in the PPACA, such as accountable care organizations? Can you share this

information with Congress?

Answer: We are aware that hospital acquisitions of other health care entities, such as physician

practices, by hospitals have been commonplace in the last few years. One of the ways that we

are encouraging competition in hospital markets is through the operation of the Medicare

accountable care organizations (ACOs). We believe that competition among ACOs will foster

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improvements in quality, innovation, and choice for Medicare beneficiaries. The antitrust

agencies (Department of Justice and Federal Trade Commission) are monitoring the competitive

effects of ACOs. These agencies issued guidance for providers seeking to become ACOs and

established a voluntary expedited review process to give feedback to providers on potential anti-

competitive activities.

CMS is providing aggregate claims data to the antitrust agencies to assist them in ensuring ACO

formation and implementation does not have a detrimental effect upon competition. The

antitrust agencies have existing enforcement processes for evaluating concerns raised about an

ACO’s formation or conduct. In addition, we believe the testing of the Advance Payment ACO

model has led to increased participation by smaller organizations in the Medicare Shared Savings

Program, thus increasing competition. I would be happy to work with you and your staff on how

we can improve on these efforts.

Questions from Senator Carper

Question 1

I think we can all agree that on the importance of curbing waste and fraud in Medicare

and Medicaid. The GAO estimates that for fiscal year 2012, improper payments for both

programs totaled $63.5 billion. In addition, the Attorney General also notes billions more

in fraud.

The good news is that this figure is down slightly from the previous two years, even as

overall spending on the two programs has increased. The bad news is that we still have a

long way to go. However, I think it is also important to recognize that the Centers for

Medicare and Medicaid Services, under your leadership, has continued to put strengthened

controls and procedures, including the use of advanced cutting edge data analysis, as a high

priority. The Centers for Medicare and Medicaid Services has adopted the philosophy of

preventing waste and fraud, as opposed to simply pursuing “pay and chase” where the

agency would make bad payments and then try to chase them down for recovery.

Ms. Tavenner, during last congressional session, I joined with a bipartisan list of 37 Senate

colleagues in legislation to take a number of important steps to fight waste and fraud in

Medicare and Medicaid. Many of these ideas were even adopted by your agency, even

without the bill becoming law. I also very much appreciate the fact that your staff

reviewed the “Medicare and Medicaid “FAST” Act, giving a lot of important technical

advice. We plan on reintroducing a new and improved version of the bill this spring.

Do you see some ongoing opportunities for continued improvement in the fight against

Medicare and Medicaid waste and fraud? Do you believe that this progress represents

significant savings for both programs?

Answer: I appreciate your interest in improving the Medicare and Medicaid programs and

combating the fraud, waste and abuse that could put these important programs at risk. As you

know this administration considers fraud prevention a top priority and we appreciate the

opportunity to work together to combat fraud in the Medicare, Medicaid, and CHIP programs. I

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challenge my management team each and every day to improve the way we do business and I

have made it clear that combatting fraud, waste and abuse in all of our programs is a top

priority. We are continually looking at ways our Center for Program Integrity can leverage the

expertise of other CMS components, our contractors and other partners, such as the States, OIG,

FBI and the Department of Justice.

I know you have been following the results of the FFS Recovery Audit program closely and to

date the RACs have recovered more than $4 billion dollars. CMS is using new cutting-edge fraud

prevention tools such as automated provider screening and predictive modeling on fee-for-

service claims to help the agency stay one step ahead of fraudsters. We are also collaborating

with new partners on fraud prevention in unprecedented ways through our joint HHS-DOJ

HEAT Task Force, our Health Care Fraud Prevention Partnership (HFPP) and our Fraud

Prevention System (FPS).

Pursuant to new authority and resources provided under the Small Business Jobs Act of 2010

CMS began screening all fee-for-service Medicare claims through a predictive analytic modeling

system similar to that used by financial sector companies to identify fraud. To build the system

CMS contracted with leading private sector companies that bring significant experience in the

field of predictive analytics to the Medicare program. Since June 2011 the FPS has screened

over a billion claims for suspicious billing activity. In its first year of implementation the FPS

identified or prevented $115.4 million in inappropriate payments, generated leads for 536

investigations, and augmented information for 511 pre-existing investigations.

As you know CMS was provided several new tools under the Affordable Care Act to strengthen

our fraud prevention efforts and stop improper payments particularly with respect to high risk

providers such as home health agencies and DME suppliers. For example, the Affordable Care

Act gave CMS the ability to use enhanced screening measures on all providers before letting

them bill the Medicare program. Under our new screening rules, new DME suppliers and home

health agencies will be subject to higher levels of screening. We are also improving the

enrollment standards for DME suppliers. Over the last four years, the Administration’s

enforcement efforts have recovered $14.9 billion, up from $6.7 billion over the prior four-year

period. Since 1997, the HCFAC Program has returned more than $23 billion to the Medicare

Trust Funds.

Question 2

I recently went to visit the Mayo Clinic and UnitedHealth and found that both health care

providers and private insurers understand the pressing need to move away from fee-for-

service payments in Medicare as quickly as possible. Many doctors and hospitals have

recommended bundled payments as a promising way to pay for improved health outcomes

and higher quality care.

What does CMS need to expand bundled payments throughout Medicare more rapidly?

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Answer: The Bundled Payments for Care Improvement initiative is testing whether a single

bundled payment for an episode of care can improve coordination between health providers. We

are testing this idea against four separate model designs. In January 2013, the Innovation Center

announced the participants in Model 1, which tests bundled payments for acute care hospital

stays, as well as the participants in Phase One of Models 2 through 4 of the Bundled Payments

for Care Improvement Initiative. Phase One is the initial period of the initiative where the

participants and CMS prepare for implementation and assumption of financial risk by sharing

data and information. Phase Two will begin this summer. Because we began testing in January,

I do not have results to report yet. We are happy to work with you to provide updates on results

as they become available.

Question 3

I see Medicare Advantage (MA) as a promising solution to move us away from fee-for-

service Medicare more quickly. However, we have to ensure that we don’t spend more on

these private plans than we do in traditional Medicare and we also need to make sure that

Medicare Advantage plans are fully available as a competitive option to all Medicare

beneficiaries. I’m particularly concerned about states like Delaware and as many as nine

other states that have 10 percent or less of our populations in Medicare Advantage plans,

partially because there are often few MA plans to choose from.

What could we do to expand Medicare Advantage and ensure that seniors in all of our

states have a meaningful choice between high quality Medicare Advantage plans and

traditional Medicare? At the same time, how could we ensure that traditional Medicare is

able to compete with Medicare Advantage plans more effectively?

Answer: Many beneficiaries have several high quality Medicare Advantage plan choices.

People with Medicare will have access to 127 four and five-star Medicare Advantage plans, 21

more top-performing plans than the previous year. Additionally, 30 percent of stand-alone

prescription drug plans available to beneficiaries received a star rating of 4 or higher. More than

37 percent of Medicare Advantage enrollees are now enrolled in a four- or five-star plan.

To help provide beneficiaries with high quality care, CMS is working to make FFS care as strong

as possible, with ACOs and other models, to better coordinate FFS care. At the same time, we

want to make sure that our managed care program is as strong as possible and that we are

incentivizing plans to improve their quality. CMS is focused on making sure both programs are

as strong as possible so even if beneficiaries don't select managed care, or do not have all the

choices that other parts of the country have, they still receive the same care coordination and that

high-quality managed care offers.

Question 4

The federal government and states have paid out over twelve billion dollars to providers,

doctors and hospitals for the electronic health record implementation incentive program.

There is concern that this program has not delivered on the significant improvement in

care that is given to U.S. citizens through expanded and improved data sharing across

providers.

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Can you explain what CMS is doing to adjust the program so that these monies are

invested more effectively to enable patient’s data to "electronically" follow the patient

better as they move through the healthcare system? This would improve the coordination

and quality of care delivery while reducing cost by eliminating duplicative services.

Answer: Health IT that enables the secure exchange of information across providers is crucial

to reforming the system, and must be a routine part of care delivery.

I assure you that electronic health record technology will be significantly improved when Stage 2

begins in 2014. This is due to the efforts of nearly 1,000 participants representing more than 500

organizations from the health information technology standards community working with us

over the past two years.

In Stage 2, providers will have to demonstrate that they can exchange structured clinical

summaries with other providers, regardless of the providers’ EHR vendor, and vendors will have

to demonstrate that they can support this interoperability. The Stage 2 final rules define common

content, format, and structured data for these summaries and include basic clinical information

regarding the care provided, such as medications, upcoming appointments, or other instructions.

CMS will also increase its emphasis on ensuring electronic exchange across providers through

many of its policies and programs. We, along with the Office of the National Coordinator, have

issued a request for information (RFI) seeking public input on what policies we believe will

strengthen the business case for electronic exchange across providers to ensure patients’ health

information will follow them seamlessly and securely wherever they access care.

Question 5

My understanding is that there has been some significant delay, over a year since it was

approved by the FDA, of making a new innovative imaging technique that contributes to

the diagnosis of Alzheimer's disease available to Medicare and Medicaid beneficiaries. This

delay continues despite the joint development and endorsement by both the Alzheimer's

Association and the Society for Nuclear Medicine of Appropriate Use Criteria that

provides physicians with a best practices diagnostic pathway for their patients with

cognitive impairments.

Could you explain how this new technology is outside the "reasonable and necessary" for

the "diagnosis or treatment" standard which governs what the CMS should be making

available to Medicare and Medicaid beneficiaries?

Answer: CMS is actively engaged in reviewing new technology to ensure timely access to

innovation for our beneficiaries. In October 2012, we opened a National Coverage Analysis (the

first step in the National Coverage Determination (NCD) process) to reconsider a prior NCD on

the use of Positron Emission Tomography (PET) scans, which provided national coverage of

PET using only specified radioisotopes for certain indications, and conditional coverage for

additional uses under the process known as Coverage with Evidence Development (CED).

Reconsideration of this NCD was requested by a stakeholder to consider coverage of PET using

a new type of radiopharmaceutical approved by the FDA in 2012 to image beta-amyloid plaques

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in certain patients being evaluated for Alzheimer’s disease and other causes of cognitive decline.

To help inform this evidence review, we convened a meeting of the Medicare Evidence

Development and Coverage Advisory Committee (MEDCAC) in January 2013. A proposed

coverage decision is expected by July 2013, with a final decision (including consideration of

public comments) expected by October 2013.

Question 6

Given that Congress extended the CBP single payment amount to retail settings, retailers

will now have the same financial incentives to limit the range of diabetes testing supplies

available. A group of stakeholders recently asked CMS to extend these patient protections

to the retail channel, and CMS responded that it would monitor implementation to see if

these protections prove to be necessary.

If CMS felt that these protections were necessary to protect beneficiaries in anticipation of

the CBP in mail order contexts, why does the agency not think that these same protections

will be necessary in retail settings?

Answer: Retail pharmacies do not have all of the same incentives as mail-order contract

suppliers in terms of providing certain items. We note that retail pharmacies do not have to bill

Medicare on an assignment-related basis, while mail-order contract suppliers do, and therefore

can charge customers more than the Medicare-approved amount for diabetic test strips (which is

commonly referred to as balance billing). Notice and comment rulemaking was required to

include the non-discrimination requirement as a term of the contract for suppliers under the

national mail-order program for diabetic testing supplies. CMS will be closely monitoring

access to necessary diabetic supplies following implementation of the new payment amounts, but

we do not believe it is necessary to initiate rulemaking for the retail setting at this time.

Question 7

Accountable Care Organizations and bundling payment programs present opportunities to

lower costs and achieve higher quality care by changing payment incentive structures to

encourage greater cooperation and coordination among providers. At the same time, these

programs create incentives that could have the inadvertent effect of denying patients access

to the most appropriate treatment for their condition as providers are now focused on

shared savings and quality metrics.

How is CMS assessing the impact of the ACO and bundling arrangements on patient access

to medical specialists and advances in medical treatments and technologies? What

safeguards are in place to ensure clinically superior procedures/technology are not

sacrificed purely for ACO participants to reduce costs and increase financial gain through

“shared savings?”

Answer: CMS’ first and most important responsibility is to ensure that its beneficiaries receive

appropriate, high-quality care. The fee-for-service payment structure does not always

incentivize quality or efficiency, since it pays for the quantity of care instead of the quality of

care. Medicare is trying to transform the care delivery system by implementing effective

practices that deliver higher quality care.

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ACOs are working to encourage providers to work together to provide more coordinated care to

their patients. ACOs agree to take responsibility for the cost and quality of their patients’ care,

to improve care coordination and safety, and to promote appropriate use of preventive health

services. In return, if they meet quality standards, they may receive a portion of any savings

gained. ACOs must meet performance measure standards on quality of care and patient

satisfaction in order to receive any shared savings monetary rewards. Those measures include

patient surveys about their doctors, shared decision-making, access to specialists, and health

status, as well as patient safety measures such as hospital readmissions, medication

reconciliation, and avoidable admissions. These quality and patient satisfaction measures

provide an important incentive to ensure that providers use effective care that results in positive

outcomes, even if the treatments required to achieve these outcomes are more costly in the short

run.

Questions from Senator Roberts

Question 1

The ACA depends on an adequate supply of physicians, especially primary care physicians.

This is not a new issue. Many reports state that in fact we should expect access issues

because there will not be enough physicians to meet the expanded demand. Yet, I’ve heard

feedback that CMS objects to innovation in GME programs that provide support for

primary care that would allow the money to follow the resident, and other novel proposals.

What approaches does CMS support and would CMS propose to address this issue?

Answer: CMS agrees that ensuring an adequate supply of physicians is crucial to the success of

the Affordable Care Act. The Affordable Care Act amended the Social Security Act to allow

any time spent by residents training in a nonprovider setting to count toward direct graduate

medical education (GME) and indirect medical education (IME) costs if the hospital incurs the

costs of residents’ salaries and fringe benefits. This change was effective for cost reporting

periods beginning on or after July 1, 2010, for direct GME, and for discharges occurring on or

after July 1, 2010, for IME and was finalized in the Calendar Year 2011 Hospital Outpatient

Prospective Payment System final rule. This change was expected to lead to an increased number

of residents training in nonprovider sites such as community-based settings. Because funding for

Graduate Medical Education is awarded based on a statutory formula, CMS may not have

flexibility to consider all innovative approaches. The President’s budget includes a proposal that

would give the Secretary the authority to set standards for teaching hospitals receiving Graduate

Medical Education payments to encourage training of primary care residents and emphasize

skills that promote high-quality and high-value health care delivery. I look forward to working

with you on this and other ideas to improve Graduate Medical Education.

Question 2

ATRA directed the agency to reduce the ESRD PPS base rate in light of the significant

reduction of drug utilization, which has coincided with an increase in the rate of non-

bundled services (e.g., blood transfusions). How does the agency plan to ensure that:

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a. The new PPS rate is adequate so dialysis providers aren’t incentivized to

inappropriately reduce necessary care in order to reduce costs, and

b. in the face of incentives to reduce costs, that treatment decisions will not be

detrimental to patient health and quality care and that the penalties for failing

quality metrics be of sufficient consequence (financial or otherwise) to incentivize

provider achievement and maintenance of quality guidelines.

Answer: Before we make any changes to the ESRD PPS rate as required by section 632 of

American Taxpayers Relief Act of 2012, we will carefully analyze the data on utilization and

include the proposed payment change based on the data in a proposed rule for public comment.

We will review comments taking into consideration issues raised by all interested parties to

ensure that beneficiaries continue to have access to the medications they need before we make a

final decision on the payment change.

Since the implementation of the ESRD PPS in January 2011, CMS has monitored real-time

health outcomes and usage rates of ESRD-related drugs, biologicals, and related procedures for

Medicare beneficiaries receiving outpatient maintenance dialysis. We will continue monitoring

outcomes and access of ESRD beneficiaries as we implement the payment change required under

section 632 of the American Taxpayers Relief Act of 2012.

Question 3

The recent crisis with the New England Compounding Centers and the meningitis

outbreak has generated renewed interest in compounding and compounded products. Can

you clarify CMS policy as it relates to compounded products? There is some confusion in

this area. I have heard that CMS has a broad policy not to reimburse for compounded

products. However we also believe that there have been LCDs that contradict this NCD.

In addition I am under the impression that CMS has codes for compounded products.

Clarity on CMS policy in this area would be appreciated.

Answer: We share your concern for the safety of drugs used by Medicare and Medicaid

beneficiaries. While we believe that most patients' needs can be met with Food and Drug

Administration (FDA)-approved drug products, we also believe it is medically appropriate for

some patients to receive compounded drugs in certain situations, including when patients are

allergic to inactive ingredients in FDA-approved drug products, or when dosage forms or

strengths of drugs that are needed by the patient are not available in FDA-approved drug

products. In such cases, we think it is appropriate for Medicare to pay for compounded drugs

(when they meet other criteria for coverage and payment) to ensure beneficiaries and recipients

have access to clinically appropriate drug therapies.

Compounded drugs may be covered under Medicare Part B when the compounded drugs are

created by a pharmacist in accordance with the Federal Food, Drug, and Cosmetic Act and when

their use meets all other criteria for services incident to a physician’s service. Medicare Part D

plans may cover multi-ingredient compounds that contain at least one ingredient that is a Part D

drug (i.e., it contains an ingredient that is an FDA-approved drug product). Additionally,

Medicare Part D plans may pay for only those ingredients within the compound that

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independently meet the definition of a Part D drug. Consequently, Medicare Part D plans may

not cover compounds made entirely from bulk active pharmaceutical ingredients.

Question 4

The number of tragic incidences involving people with serious mental illness and substance

use disorders seems to be escalating in number and magnitude over the last several years.

At the same time innovative treatments are being approved by the FDA that patients don’t

have access to. What are the most prominent barriers to access, for the Medicare and

Medicaid populations, for all FDA-approved products that have been shown to be safe and

effective to treat people with serious mental illness and substance use disorders? What are

your suggestions for making these treatments more accessible to the Medicare and

Medicaid populations?

Answer: Medicare and Medicaid beneficiaries have access to FDA approved products (for

Medicaid beneficiaries, subject state supplemental rebate policies). CMS takes seriously issues

of access to care for the Medicare and Medicaid populations and will be happy to work with you

and your staff on specific issues related to access to benefits.

Questions from Senator Bennet

Question 1

In Colorado, we have a number of CMS activities, including the Comprehensive Primary

Care effort, Medicaid Accountable Care Organizations, Bundled Payment pilots, the Care

Transitions program and the state innovation model. But while Coloradans have embraced

transformation and innovation, they will need leadership from CMS to help navigate how

all of these programs fit together. How is CMS planning to eventually integrate the results

of all these various programs state-by-state to transform the delivery system?

Answer: We are testing a number of ideas -- both at the local and national level and within

different geographical settings -- that address the best way to change the incentive structure,

reward integrated care, and explore payment alternatives to the fee-for-service system. There is

no one solution to lowering costs while improving care across all populations, providers, and

care settings.

One of our first considerations when deciding whether to test a model is whether a model will be

able to be expanded if it succeeds. Finding those types of successful models that can affect the

Medicare or Medicaid on a large scale is the purpose of our Center for Medicare and Medicaid

Innovation, and that is why we are testing a broad range of models.

Since Medicare and Medicaid serve diverse populations in different settings, we know that every

model may not be able to be expanded universally because it may not be applicable for every

beneficiary or community. But, every model we test could potentially be expanded in some way.

For example, a model that is tested in part of a frontier state could be scaled to serve

beneficiaries in other frontier states. A model that succeeds in a rural area might not be

appropriate for a large urban center, but we believe it is important to test models that may hold

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answers for rural communities, or for certain populations, even if they may not be expanded to

every community nationwide.

Question 2

For years, Congress has been looking for bipartisan ways to replace the Medicare fee-for-

service system with a new payment reform that pays for quality—not quantity of service.

While we wait for the results of various demonstrations and pilot projects, can CMS give

any immediate options to Congress on ways to replace the Medicare fee-for-service system?

Answer: As you mentioned, CMS is testing a variety of payment models that seek to better

integrate care and better incentivize quality. We are also eager for results from these new

payment models. For example, the Comprehensive Primary Care Initiative is a multi-payer

initiative where CMS pays primary care providers monthly care management fees for

comprehensive care management on top of their regular Medicare Fee-for Service payment.

After two years, CMS offers the providers the chance to share in any savings they generate.

Other payers, often including Medicaid, are also providing enhanced payment for primary care

services.

Another model is the accountable care organization (ACO). In addition to the Medicare Shared

Savings Program, we are testing the Pioneer ACO model and the Advance Payment ACO model.

ACOs involve groups of doctors, hospitals, and providers that accept accountability for

providing high quality coordinated care to Medicare beneficiaries. ACOs are eligible for shared

savings and may be subject to losses. Finally, the Bundled Payments for Care Improvement

initiative is comprised of four broadly defined models of care, which link payments for multiple

services beneficiaries receive during an episode of care. We think episode-based payment has the

potential to transform the delivery system.

Question 3

We recently held a roundtable on mental health issues with Colorado mental health

stakeholders. The participants highlighted issues regarding the rules and regulations

around mental health treatment in both Medicare and Medicaid. Providers in Colorado

tell me that Medicaid and Medicare have different rules on who can provide certain kinds

of treatment, where they can be provided, and what services are covered. These different

rules lead to an extraordinary amount of extra paperwork and billing time, all time that

could be spent with patients. As we hope to see more alignment of mental health services

with primary care, as Administrator, would you prioritize aligning the rules and

regulations of mental health services between Medicare and Medicaid?

Answer: I’ve been on the other side of regulations, and know we need to reduce the regulatory

burden on hospitals and health care providers, so they can focus on the important work of

serving their patients. CMS is aware that different rules between Medicare and Medicaid can

cause confusion for both providers and beneficiaries. To help address these differences, the

Medicare-Medicaid Coordination Office has launched the Alignment Initiative, with the goal to

more effectively integrate the Medicare and Medicaid programs. Partnering with States, health

care providers, caregivers and beneficiaries, CMS is working to improve quality, reduce costs

and improve the Medicare-Medicaid enrollee experience. Through the Alignment Initiative, the

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Medicare-Medicaid Coordination Office seeks to transcend boundaries, facilitating a national

conversation with stakeholders from around the country to identify opportunities for alignments

and to improve the two programs.

CMS is streamlining regulations that have been identified as unnecessary, obsolete, or

excessively burdensome on health care providers. Under the President’s Executive Order on

Improving Regulation and Regulatory Rules, we have already finalized two regulations that will

reduce this burden-. The first rule revises the Medicare Conditions of Participation (CoPs) for

hospitals and critical access hospitals (CAHs). CMS estimates that annual savings to hospitals

and CAHs will be approximately $940 million per year. The second, the Medicare Regulatory

Reform rule, will produce savings of $200 million in the first year by promoting efficiency. This

rule eliminates duplicative, overlapping, and outdated regulatory requirements for health care

providers.

Question 4

Alzheimer’s disease is estimated to cost the nation $200 billion this year alone, and about 70

percent of that - $140 billion – is shouldered by taxpayers in Medicare and Medicaid costs.

If the current trajectory holds, this number will exceed $1 trillion annually in the coming

decades. Leading experts and the government have stressed the value of an early and

accurate diagnosis in treating Alzheimer’s to prevent costly and time-consuming

misdiagnoses, and the need to begin proper care planning earlier. At the same time,

companies have been working to create diagnostic tests that could lead to an earlier finding

of Alzheimer’s. As diagnostic technologies for Alzheimer’s and other diseases continue to

be developed and gain approval by the FDA, what measures can CMS take to prioritize

coverage of diagnostic tools, particularly when early diagnosis of diseases like Alzheimer’s

and others can lead to dramatically lower costs?

Answer: CMS agrees that tackling Alzheimer’s disease is a national priority. We are an active

participant in the National Plan to Address Alzheimer’s Disease, established by the Department

of Health and Human Services (HHS) pursuant to the National Alzheimer's Project Act (NAPA)

enacted in January 2011. The National Plan sets forth five goals, including the development of

effective prevention and treatment approaches for Alzheimer's disease and related dementias by

2025. A National Alzheimer’s Project Advisory Council (including a senior CMS

representative) meets quarterly to discuss the efficacy of government programs in this area, and

annually evaluates and updates the National Plan.

We are also actively engaged in reviewing new technology to ensure timely access to innovation

for our beneficiaries. In October 2012, we opened a National Coverage Analysis (the first step in

the National Coverage Determination (NCD) process) to reconsider a prior NCD on the use of

Positron Emission Tomography (PET) scans, which provided national coverage of PET using

only specified radioisotopes for certain indications, and conditional coverage for additional uses

under the process known as Coverage with Evidence Development (CED). Reconsideration of

this NCD was requested by a stakeholder to consider coverage of PET using a new type of

radiopharmaceutical approved by the FDA in 2012 to image beta-amyloid plaques in certain

patients being evaluated for Alzheimer’s disease and other causes of cognitive decline. To help

inform this evidence review, we convened a meeting of the Medicare Evidence Development and

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Coverage Advisory Committee (MEDCAC) in January 2013. A proposed coverage decision is

expected by July 2013, with a final decision (including consideration of public comments)

expected by October 2013.

Question 5

CMS recently announced that they will postpone rulemaking on Stage 3 meaningful use

requirements until early next year. Timely implementation of Stage 3 meaningful use

requirements as well as provider and hospital adoption of electronic health records are

critical to improving patient outcomes and facilitating health care savings. As the Food and

Drug Administration releases their Unique Device Identifier (UDI) System final rule in the

coming year, can you comment on ways that CMS could link UDI to improvement in health

outcomes?

Answer: CMS and the Office of the National Coordinator are working together to accelerate

health information exchange (HIE) and build a seamless and secure flow of information essential

to transforming the health care system. We do not expect a delay in Stage 3 implementation. In

2013, CMS is focusing on successful implementation of MU2, program integrity, advancing

interoperability, achieving alignment across programs, and hitting clear adoption targets by

year’s end. We think it is important to have an opportunity to learn from stakeholders during

meaningful use implementation, and use this feedback to inform Stage 3.

We continue to coordinate with a wide range of stakeholders, including our federal partners, to

inform the electronic health records system and our quality measures. CMS and FDA work in a

partnership that is facilitated by a formal Memo of Understanding (MOU). The partnership

between the agencies enhances information sharing efforts, promotes efficient utilization of tools

and expertise for product analysis, validation and risk identification, and build infrastructure and

processes that meet the common needs for evaluating the safety, efficacy, utilization, coverage,

payment, and clinical benefit of drugs, biologics and medical devices.

Question 6

What steps do you plan to take to improve CMS’ ability to measure the quality of care

provided in ACOs? I see many providers in my state of Colorado willing to implement

innovative technologies that are clinically appropriate, but they are concerned that quality

measures do not always keep up. What steps can CMS take to ensure that the use of such

clinically appropriate technology and implementation of new innovations will not result in

the provider being penalized on their quality score? Is there a mechanism to adjust the

quality scores where quality measures may not have caught up to advanced care delivery?

Answer: In the Medicare Shared Savings Program, accountable care organizations (ACOs) are

accountable for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries

assigned to the ACO. ACOs have significant flexibility to invest in redesigned care processes for

high quality and efficient service delivery, including implementing innovative technologies.

The quality metrics proposed for ACOs and finalized after consideration of public comments

were a careful balance between ensuring that quality of care is maintained while decreasing the

reporting burden on ACOs. CMS is committed to developing and adopting a mix of process,

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outcome, and patient experience of care measures, including measures of safety, care transitions,

and changes in patient functional status. As the science of quality measurement evolves, we will

be able to make determinations on which measures are the most meaningful to providers and

health care professionals and will most effectively drive progress and improvement. In future

rulemaking for the Medicare Shared Savings Program, we anticipate reviewing the selected

quality measures and seeking public comment on other measures that could be used by ACOs.

Question 7

Section 1341 of the Affordable Care Act establishes a transitional reinsurance program

intended to stabilize premiums for coverage in the health care marketplace from 2014 to

2016. The Act requires $25 billion to be collected from health insurance issuers and group

health plans, including self-insured employers, over the three-year period. Additionally,

the HHS Notice of Benefit and Payment Parameters for 2014 (CMS-9964-P): Application of

Transitional Reinsurance Program to Self-funded Health Plans proposes a national per

capita fee in 2014 of $63 per covered life, including employees, dependents, early retirees,

and COBRA-eligible individuals. I want to ensure that my constituents still have access to

robust, affordable, employer-sponsored health insurance. Has CMS performed an impact

analysis of the effects of the transitional reinsurance fee on employer-sponsored coverage?

In particular, how might it affect the cost to and coverage of dependents, early retirees, and

participants?

Answer: The Affordable Care Act directs that a transitional reinsurance program be established

to help stabilize premiums for coverage in the individual market from 2014 through 2016. The

reinsurance program is designed to alleviate the need for issuers to build into premiums the risk

of enrolling individuals with significant unmet medical needs. The program is expected to

reduce premiums in the individual market by between 10 and 15 percent in 2014.

To assist with the development of the payment parameters used for reinsurance, HHS developed

a model with reference to existing national models such as those used by the Congressional

Budget Office and Office of the Actuary. The policy resulting from the model maximizes the

range of health insurance issuers and self-insured group health plans contributing to the

reinsurance pool, lowering the cost per enrollee to the extent possible permitted by the law. Both

reinsurance and market reforms such as guaranteed issue should lead to fewer unreimbursed

health costs, lowering the costs for issuers and group health plans.

Question 8

The American Taxpayer Relief Act included a payment adjustment to the End Stage Renal

Disease bundled payment. The rebasing of dialysis care payment was estimated by CBO to

be a cut of at least 4%. I have been hearing concerns from my constituents in Colorado

that this could adversely impact patient access, particularly in underserved areas. Dialysis

providers have expressed concerns that facilities could close. As CMS implements this

payment adjustment, what measures will you take to monitor and protect access for

patients?

Answer: We agree with the importance of appropriate payments to ensure access to dialysis

treatment for ESRD beneficiaries. Since the implementation of the ESRD PPS in January 2011,

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CMS has monitored real-time health outcomes and usage rates of ESRD-related drugs,

biologicals, and related procedures for Medicare beneficiaries receiving outpatient maintenance

dialysis. We will continue monitoring outcomes and access of ESRD beneficiaries as we

implement the payment change required under section 632 of the American Taxpayers Relief

Act of 2012.

In addition, before we make any changes to the ESRD PPS rate, we will carefully analyze the

data on utilization and include the proposed payment change based on the data in a proposed rule

for public comment. We will review comments taking into consideration issues raised by

stakeholders to ensure that beneficiaries continue to have access to the medications they need

before we make a final decision on the payment change.

Question 9

As you know, the pediatric dental benefit is an essential health benefit that may be

provided as part of a comprehensive package or a standalone dental plan. Nevertheless,

recent pronouncements from CCIIO regarding the offer and purchase of the pediatric

dental EHB have resulted in confusion in the marketplace. Specifically, on the Colorado

exchange, the pediatric benefit must be offered but its purchase is not required. Outside the

exchange, the purchase is mandated (even for childless adults) and responsibility for the

reasonable assurance that an individual has purchased the pediatric dental benefit of

purchase rests with the major medical carrier. This lack of equitable treatment of the

pediatric dental benefit inside and outside of the exchanges may preclude children from

receiving access to important oral services from their current stand alone dental plan,

which is required by the ACA. Has CMS considered how this differing treatment in the

Exchange will impact coverage of and access to dental care for kids? Can you ensure that

CMS will provide equitable treatment for the pediatric dental benefit?

Answer: CMS has taken steps to implement the provisions regarding the pediatric dental

essential health benefit in a manner that is consistent with the statute and provides as many

consumer protections as possible. Essential health benefit requirements mandate that certain

issuers offer certain benefits, but do not require individuals or families to obtain coverage for a

particular benefit. The Affordable Care Act requires issuers offering non-grandfathered coverage

in the individual and small group markets to offer the essential health benefits. Section 1302 of

the Affordable Care Act also allowed issuers in an Marketplace to not offer pediatric dental

coverage if there is a stand-alone dental plan offering the pediatric dental essential benefit

operating in that exchange. Outside the Marketplace, issuers are required to offer all essential

health benefits, including the pediatric dental essential health benefit; however, the essential

health benefit final rule provided a clarification regarding situations in which issuers outside of

Exchanges would not be found to be non-compliant with the requirement to offer essential health

benefits. In situations in which an issuer is reasonably assured that an individual has purchased a

Marketplace-certified stand-alone dental plan, that issuer, as a matter of compliance with section

2707(a) of the Affordable Care Act, would not be found non-compliant.

Questions from Senator Cardin

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Question 1

In the Affordable Care Act, the Finance Committee and then the Congress clearly

instructed your agency to establish an essential health benefits package that included a

pediatric dental benefit. Congress did not intend to create a market advantage for stand-

alone dental plans over an affordable pediatric dental benefit embedded in a

comprehensive plan.

In addition to the clear language of the ACA, you have also heard about this issue from

several members of this Committee, urging you to follow the law and to not permit stand-

alone dental plans to require an additional out-of-pocket limit for stand-alone plans in

addition to the limit already established by the law. Your own Director of Medicare, Jon

Blum, said to this Committee that it is a mistake to “silo” oral health care and treat it

separately, as we once did with mental health care.

In your final rule for state exchanges, you allow each state to determine its own separate

pediatric dental out-of-pocket limit, creating a patchwork of unequal benefits across the

nation. Congress did not permit states to set their own out-of-pocket limits for the

comprehensive health plans—why are you discriminating against oral health? Then in

the federally funded exchange rule, you proposed a separate out of pocket limit for

pediatric dental plans of $1000. When asked whether the limit was $1000 per family or per

child, the staff who wrote the proposed rule said they didn’t know which. Later, we were

told that the high out-of-pocket limit was to ensure that plans’ premiums would be

affordable. But the health plans’ own analysis says differently.

You also said that it would be too complex for dental insurance companies to coordinate

benefits and determine when the out of pocket maximum had been met in the medical plan.

But in CHIP, there is a limit on out-of-pocket expenses on both the medical and dental

side. Those out of pocket expenses need to be coordinated between medical and dental

plans. It is not the families’ burden.

I have reviewed the Stabenow-Lincoln Amendment that “allow(s) stand-alone dental plans

to offer the required pediatric dental services and allows them to be offered in the

individual and small group markets including within the insurance exchanges.” I have also

reviewed the transcript of Committee’s deliberations on the ACA. It is the view of the

Finance Committee that nothing in the Stabenow-Lincoln amendment, the final law, or the

committee’s deliberations was intended to remove the ACA’s consumer protections from,

or impose additional cost-sharing requirements upon, enrollees in stand-alone pediatric

dental policies. This was not based on Congressional intent and is in fact, contrary to the

ACA as written.

In what part of the law was CMS given the authority to eviscerate consumer protections

for children enrolled in stand-alone dental plans? What in the law gave CCIIO the

authority to permit stand-alone plans to require an additional out-of-pocket limit above

and beyond what is in the law?

Answer: CMS has taken steps to implement the provisions regarding the pediatric dental

essential health benefit in a manner that is consistent with the statute and provides as many

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consumer protections as possible. It is important to remember that when provided under a

separate policy, certificate, or contract of insurance, or when they are otherwise not an integral

part of the plan, limited scope dental benefits are excepted benefits, as defined by PHS Act

section 2791(and its implementing regulations at 45 C.F.R. § 146.145(c)), and thus not subject to

the requirements of Parts A and B of Title XXVII of the PHS Act. This means that stand-alone

dental plans are not subject to the insurance market reform provisions of the Affordable Care Act

that amend the PHS Act and generally apply to non-grandfathered health plans in the individual

and group markets inside and outside the Marketplace, such as guaranteed availability and

renewability of coverage.

In light of this, CMS sought, through the regulatory process, to apply as many consumer

protections as possible. These protections include prohibition on annual and lifetime limits (45

CFR 155.1065(a)(2), as well as a modified standard for the annual limitations on cost-sharing

(45 CFR 155.150(a)).

In addition, the final essential health benefits rule requires dental plan issuers to offer plans at

either a low (70%) or high (85%) actuarial value. Actuarial value is a measure of expected plan

spending across a standard population. This means that every stand-alone dental plan purchased

in an Exchange will cover, on average, 70% or 85% of costs that individuals could be expected

to incur in a year for pediatric essential dental benefits.

Finally, with respect the annual limitation on cost sharing, the essential health benefits final rule

provided that stand alone dental plans covering the pediatric essential dental benefit must

demonstrate that they have a reasonable annual limitation on cost-sharing, as defined by an

Marketplace. For coverage year 2014, CMS has interpreted a reasonable limit to be $700 for a

plan with one child enrollee or $1,400 for a plan with two or more child enrollees. It is important

to remember that these annual limits on cost-sharing are catastrophic limits beyond which all

pediatric essential health benefits would be covered in full.

Question 2

In the ACA, CMS had ample opportunity to encourage the coordination of medical and

dental plans. A number of states have been interested in requiring qualified health plans to

embed dental in the medical plan under one premium. Why has CMS determined that

states cannot require the embedding of dental benefits in medical plans?

Answer: CMS has interpreted section 1302 (b)(4)(F) of the Affordable Care Act to allow

issuers in an Marketplace to not offer coverage of the pediatric dental essential health benefit if

an exchange-certified pediatric dental plan is offered in that Marketplace.

Question 3

Is CCIIO policy consistent with the terms of the statute? The statute’s limitations on

payment of cost sharing reduction assistance for pediatric oral health coverage appear to

be designed to ensure simply that QHPs that do not offer pediatric oral health benefits also

do not receive cost-sharing reductions that instead are properly allocable to pediatric oral

health services. Nothing in the provision of law cited by CCIIO appears to limit the

entitlement itself, only the manner in which the entitlement is operationalized. Yet the

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CCIIO policy appears to suggest that in cases in which children must be enrolled in two

different plans, their cost-sharing entitlement will be reduced.

Answer: Yes. Section 1402(c)(5) of the Affordable Care Act states if an individual enrolls in

both a QHP and a stand-alone dental plan, the provisions on cost-sharing reductions under

sections 1402(a) and(c) of the Affordable Care Act do not apply to that portion of the cost-

sharing reductions properly allocable to pediatric dental EHB. Thus, if an individual enrolls in

both a QHP and a stand-alone dental plan offered on a Marketplace, cost-sharing reductions are

not payable with respect to pediatric dental benefits offered by the standalone dental plan.

Question 4

What organizational options (such as linked offerings) can states – and the FFE – use to

overcome the potential issues that arise when one EHB package is offered through two

separate plans? CCIIO’s policy does not address the strategies that states might utilize – or

that the FFE will use – in order to assure that proper QHP/stand-alone dental packaging

occurs so that children receive the full benefits to which they are entitled and premium

credits and cost-sharing reduction assistance to which families are entitled are allocated

properly across both plans. Having the Exchange play this role is parallel to the one played

by employer plans that offer their participants and their families a menu of both medical

and dental benefit plan choices. The only difference is that Exchanges automatically would

enroll the children in such families in the dental plan as well as in the QHP, while adult

dental plan enrollment would remain purely optional and without financial assistance.

CCIIO has not yet indicated what flexibility SBEs, SPEs, or the FFE will have to package

offerings and coordinate enrollment in order to ensure that children secure full EHB-level

coverage, while their families receive the full premium assistance and cost-sharing subsidy

protection to which they are entitled.

Answer: Section 1311(d)(2)(ii) of the Affordable Care Act, codified at 45 CFR 155.1065 allows

limited scope dental plans meeting the requirements of the pediatric dental essential benefit to be

offered in a Marketplace either separately as a stand-alone plan or in conjunction with a qualified

health plan. Thus, Marketplaces must allow for the offering of stand-alone pediatric dental plans

as well as dental plans that are offered in conjunction with a QHP.

Question 5

Where in the law are you authorized to state that coverage for pediatric dental services is

not required coverage?

Answer: Sections 1302 of the Affordable Care Act and 2707(a) of the Public Health Service Act

are requirements on health insurance issuers in the individual and small group markets to offer

essential health benefits; they are not requirements on individuals or families to obtain coverage

for a particular benefit. Section 1302(b)(4)(F) of the Affordable Care Act allows issuers in an

Marketplace to not offer pediatric dental coverage if there is a stand-alone dental plan offering

the pediatric dental essential benefit operating in that Marketplace. Because of this specific

statutory exception, qualified health plans in a Marketplace, which are either individual or small

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group market plans, do not fail to be qualified health plans solely because they do not offer

coverage of the pediatric dental essential health benefit.

Section 1501 of the Affordable Care Act added section 5000A to the Internal Revenue Code and

requires that nonexempt individuals either maintain minimum essential coverage or make a

shared responsibility payment. Some types of minimum essential coverage, such as Medicare, do

not include coverage of the essential health benefits.

Question 6

I have also been engaged in ongoing discussions with you about protections for Medicare

beneficiaries in private health plans, and I have mentioned one particularly troubling

situation to you in recent months. It involves a private Medicare HMO plan in Maryland

that terminated its agreement with a very popular provider group based at an FQHC with

one week to go in the open enrollment period. The Medicare law only requires 60 days

notice when a plan and provider terminate their contractual relationship without cause,

and as it turned out, the plan chose to end its relationship with this provider group at the

end of December.

Physicians tried to contact all beneficiaries but were unable to reach all of them. We later

learned that when beneficiaries called the health plan in mid-December to ask if their

doctor would be on the plan’s panel in 2013, they were told “Yes, your doctor is still in our

plan.” What they weren’t told was that a little more than 60 days later, that would no

longer be the case. Despite my written request to you, and that of Maryland’s health

secretary, to provide these seniors with additional options, to extend their open season,

CMS did nothing to help them.

On February 28, they lost their primary care physician. They are locked into this health

plan until 2014, but they have lost their primary care physician. These are very vulnerable

seniors who live in an area of Baltimore that is not affluent. Their doctors were based at a

Community Health Center that was convenient to their homes. The nearest participating

provider who is accepting new Medicare beneficiaries is now a long bus or cab ride away

from their homes. In fact, the plan is in the process of terminating agreements with other

providers who are based in Baltimore City and is moving to operate primarily in wealthier

suburban areas. I’d like to hear from you that you are truly committed to the people

CMS was created to protect, Medicare, Medicaid and CHIP beneficiaries. However, when

viewed along with other recent decisions by this agency, it appears that you may be acting

with greater concern for health insurance companies than you are for patients.

What will you do now to help these beneficiaries? What are you planning to do to protect

other seniors from this type of abuse in the future? Will you support legislation that

restricts plans from terminating contracts close to or during the open enrollment process?

If not, why not?

Answer: The law establishes specific election periods during which beneficiaries can change

MA plans. As a result, there is an ongoing special enrollment period for individuals that have the

Low Income Subsidy. The existing special enrollment period would allow affected enrollees to

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change, at any time. In addition, CMS has processes in place for assisting individuals on a case-

by-case basis regarding their enrollment issues. Affected individuals who believe they enrolled

in a plan based on misrepresented information about the plan can contact 1-800-MEDICARE to

see if they can enroll in another plan.

We also become concerned when a network-based MA plan experiences a significant network

change during the contract year. When this occurs, CMS reviews the situation to assure that the

plan maintains an adequate network, follows our guidelines for member notification and

mitigates possible disruption of care for the impacted enrollees.

When an individual enrolls in a MA plan, they are agreeing to receive Medicare benefits through

the plan and its network of providers. An MA plan’s provider network can change during the

year and this possibility is conveyed to members through the plan’s Evidence of Coverage,

which is provided prior to the Annual Election Period for current members and upon enrollment

for new members, and through CMS’ educational materials, such as Medicare & You. To

protect beneficiaries, CMS has requirements related to plan network changes. If an MA plan’s

provider network changes during the plan year, it must give its members at least 30-calendar

days advance notice of the network change, and demonstrate that its network is still adequate to

serve its members.

Question 7

According to 2 USC 906, which clarifies the application of the sequestration cuts to

Medicare, it appears that sequestration should only apply to “services furnished during the

one-year period beginning on the first day of the first month beginning after the date the

order is issued.” Stated another way, it appears that Medicare sequestration only should

apply to services furnished on or after April 1, 2013 (i.e. the first day of the first month

after the March 1, 2013 sequestration order).

However, CMS issued a guidance to health care providers which states that, “ In general,

Medicare FFS claims with dates-of-service or dates-of-discharge on or after April 1, 2013,

will incur a 2 percent reduction in Medicare payment.”

I am concerned that, by applying to home health claims submitted for an episode of care

that ends after April 1, 2013, the guidance you have issued may be interpreted as affecting

payment for services of that episode that were furnished before April 1, 2013. For

example, it is unclear if payment for a claim submitted for an episode that began on March

25, but ends on April 15, 2013 will be reduced under sequestration for all of the services

furnished under the episode, including services that were provided before April 1.

Does this mean that CMS would subject an entire home health episode of care that began

on March 25 but ended on April 2 to the 2 percent reduction? If so, I believe such an

interpretation is inconsistent with the statute and would ask that you issue further

guidance clarifying that any home health services provided prior to April 1, 2013 will not

be reduced.

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Answer: Under the Budget Control Act, the sequester applies to Medicare outlays. Home

health episode claim payment rates are based on the final day of the episode (the “through date”),

rather than the first day of the episode. In addition, the final payment for an episode is made at

the end of the episode. Accordingly, the 2% reduction applies to all episodes that have end dates

on or after April 1, 2013, regardless of their start date, including episodes that began prior to

April 1, 2013. For example, because the final payment for an episode ending on or after April 1,

2013 would be made on or after April 1, 2013, and the funds, or Medicare outlays, for such

payment would leave the Trust Funds on or after April 1, 2013, the entire episode is subject to

sequestration.

Question 8

In the recently released Call Letter for the 2014 plan year CMS identified concerns it had

with the use of preferred pharmacy networks in the Medicare Part D program,

particularly the potential for beneficiary disruption and travel costs, especially in rural

areas. CMS also indicated it was concerned that the structure of some preferred networks

may actually be increasing costs for the Medicare program. As the use of these networks

has become more widespread in recent years and is expected to continue to grow, what

actions has CMS taken, or does CMS plan to take, to ensure that the use of preferred

pharmacy networks in the Medicare Part D program does not affect beneficiary access and

health, lessen quality of care or increase costs to the Medicare program?

Additionally, the OIG recently released a report stating that gaps exist in CMS’s oversight

of the Medicare Plan Finder reporting requirements. How is CMS ensuring that

beneficiaries have access to all of the information they need about specific plan benefits,

including whether or not a plan uses a preferred pharmacy network and which pharmacies

are included in those networks?

Answer: Part D regulations that permit lower cost sharing at some “preferred” network

pharmacies also require that such cost sharing reductions must not increase CMS payments. In

order to ensure that Part D sponsors with preferred pharmacy networks are meeting this

requirement, we have begun to scrutinize Part D drug costs in PDPs with preferred networks, and

comparing these to costs in the non-preferred networks, as well as to costs in PDPs without

preferred networks. Our initial results suggest that for some plans, aggregate unit costs weighted

by utilization (for the top 25 brand and top 25 generic drugs) may be higher in preferred

networks than in non-preferred networks. Combined with lower cost sharing, we are concerned

that these higher unit costs may violate the requirement not to increase payments to such plans.

We have contacted the plan sponsors identified in our analysis to initiate the validation of our

findings.

As we indicated in the 2014 Call Letter issued April 1, we strongly believe that including any

pharmacy that can meet the terms and conditions of the preferred arrangements in the sponsor’s

preferred network is the best way to ensure that such networks promote price competition and

lower costs in the Part D program. Opening preferred pharmacy networks to any pharmacy that

can meet the network’s terms and conditions would also likely mitigate some beneficiary

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disruption and travel costs, especially in rural areas. Mandating this policy for all Part D

sponsors would require rulemaking by CMS.

Regarding the Medicare Plan Finder, the Medicare Plan Finder continues to be refined to make

sure that it provides the most accurate information possible. As of April 2012, a beneficiary is

now able to see drug price estimates that reflect if the pharmacy selected is preferred or non-

preferred for a given plan. If a pharmacy is not in the selected plan’s network, the full price of

the drug is shown. Concerns about the Medicare Plan Finder being time-consuming may be a

reflection of the increased number of inputs needed to generate an accurate cost estimate. Having

the Medicare Plan Finder prompt the user for exact drug names, quantity and dosing regimen,

Part D plan, subsidy eligibility, and choice of pharmacy provides beneficiaries access to highly

valuable information, to help select the best coverage option and to anticipate medical expenses

for the coming year.